Correlation Between Banco BTG and Brookfield

Can any of the company-specific risk be diversified away by investing in both Banco BTG and Brookfield at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Banco BTG and Brookfield into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Banco BTG Pactual and Brookfield, you can compare the effects of market volatilities on Banco BTG and Brookfield and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Banco BTG with a short position of Brookfield. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco BTG and Brookfield.

Diversification Opportunities for Banco BTG and Brookfield

-0.68

Correlation Coefficient

Banco BTG  Brookfield

Excellent diversification

The 3 months correlation between Banco and Brookfield is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Banco BTG Pactual and Brookfield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield and Banco BTG is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Banco BTG Pactual are associated (or correlated) with Brookfield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield has no effect on the direction of Banco BTG i.e., Banco BTG and Brookfield go up and down completely randomly.

Pair Corralation between Banco BTG and Brookfield

Assuming the 90 days trading horizon Banco BTG Pactual is expected to under-perform the Brookfield. But the preferred stock apears to be less risky and, when comparing its historical volatility, Banco BTG Pactual is 1.02 times less risky than Brookfield. The preferred stock trades about -0.01 of its potential returns per unit of risk. The Brookfield is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  3,930  in Brookfield on October 8, 2024 and sell it today you would earn a total of  4,927  from holding Brookfield or generate 125.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.31%
Values	Daily Returns

Banco BTG Pactual  vs.  Brookfield

Banco BTG Pactual

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banco BTG Pactual has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Preferred Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Brookfield

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Brookfield sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Banco BTG and Brookfield

The main advantage of trading using opposite Banco BTG and Brookfield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco BTG position performs unexpectedly, Brookfield can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Brookfield will offset losses from the drop in Brookfield's long position.

The idea behind Banco BTG Pactual and Brookfield pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..