Correlation Between Banco Do and Multilaser Industrial

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

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

Diversification Opportunities for Banco Do and Multilaser Industrial

0.4

Correlation Coefficient

Banco Do  Multilaser Industrial

Very weak diversification

The 3 months correlation between Banco and Multilaser is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Banco do Estado and Multilaser Industrial SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multilaser Industrial and Banco Do 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 do Estado are associated (or correlated) with Multilaser Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multilaser Industrial has no effect on the direction of Banco Do i.e., Banco Do and Multilaser Industrial go up and down completely randomly.

Pair Corralation between Banco Do and Multilaser Industrial

Assuming the 90 days trading horizon Banco do Estado is expected to generate 0.34 times more return on investment than Multilaser Industrial. However, Banco do Estado is 2.9 times less risky than Multilaser Industrial. It trades about -0.09 of its potential returns per unit of risk. Multilaser Industrial SA is currently generating about -0.05 per unit of risk. If you would invest  1,623  in Banco do Estado on November 27, 2024 and sell it today you would lose (123.00) from holding Banco do Estado or give up 7.58% of portfolio value over 90 days.

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

Banco do Estado  vs.  Multilaser Industrial SA

Banco do Estado

Risk-Adjusted Performance

Very Weak

Over the last 90 days Banco do Estado has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Preferred Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Multilaser Industrial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Multilaser Industrial SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Banco Do and Multilaser Industrial

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

The idea behind Banco do Estado and Multilaser Industrial 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.