Correlation Between Banco Patagonia and Banco Hipotecario

Can any of the company-specific risk be diversified away by investing in both Banco Patagonia and Banco Hipotecario 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 Patagonia and Banco Hipotecario into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Banco Patagonia and Banco Hipotecario SA, you can compare the effects of market volatilities on Banco Patagonia and Banco Hipotecario 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 Patagonia with a short position of Banco Hipotecario. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Patagonia and Banco Hipotecario.

Diversification Opportunities for Banco Patagonia and Banco Hipotecario

0.9

Correlation Coefficient

Banco Patagonia  Banco Hipotecario

Almost no diversification

The 3 months correlation between Banco and Banco is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Banco Patagonia and Banco Hipotecario SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Hipotecario and Banco Patagonia 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 Patagonia are associated (or correlated) with Banco Hipotecario. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Hipotecario has no effect on the direction of Banco Patagonia i.e., Banco Patagonia and Banco Hipotecario go up and down completely randomly.

Pair Corralation between Banco Patagonia and Banco Hipotecario

Assuming the 90 days trading horizon Banco Patagonia is expected to generate 1.04 times less return on investment than Banco Hipotecario. But when comparing it to its historical volatility, Banco Patagonia is 1.02 times less risky than Banco Hipotecario. It trades about 0.16 of its potential returns per unit of risk. Banco Hipotecario SA is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  2,660  in Banco Hipotecario SA on October 11, 2024 and sell it today you would earn a total of  55,440  from holding Banco Hipotecario SA or generate 2084.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Banco Patagonia  vs.  Banco Hipotecario SA

Banco Patagonia

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Patagonia are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Banco Patagonia sustained solid returns over the last few months and may actually be approaching a breakup point.

Banco Hipotecario

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Hipotecario SA are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Banco Hipotecario sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Banco Patagonia and Banco Hipotecario

The main advantage of trading using opposite Banco Patagonia and Banco Hipotecario positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco Patagonia position performs unexpectedly, Banco Hipotecario 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 Banco Hipotecario will offset losses from the drop in Banco Hipotecario's long position.

The idea behind Banco Patagonia and Banco Hipotecario SA 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 Global Correlations module to find global opportunities by holding instruments from different markets.