Correlation Between Banco Do and Alupar Investimento

Can any of the company-specific risk be diversified away by investing in both Banco Do and Alupar Investimento 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 Alupar Investimento 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 Alupar Investimento SA, you can compare the effects of market volatilities on Banco Do and Alupar Investimento 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 Alupar Investimento. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Do and Alupar Investimento.

Diversification Opportunities for Banco Do and Alupar Investimento

0.9

Correlation Coefficient

Banco Do  Alupar Investimento

Almost no diversification

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

Pair Corralation between Banco Do and Alupar Investimento

Assuming the 90 days trading horizon Banco do Estado is expected to under-perform the Alupar Investimento. In addition to that, Banco Do is 1.26 times more volatile than Alupar Investimento SA. It trades about -0.16 of its total potential returns per unit of risk. Alupar Investimento SA is currently generating about -0.18 per unit of volatility. If you would invest  3,136  in Alupar Investimento SA on September 8, 2024 and sell it today you would lose (383.00) from holding Alupar Investimento SA or give up 12.21% of portfolio value over 90 days.

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

Banco do Estado  vs.  Alupar Investimento SA

Banco do Estado

Risk-Adjusted Performance

0 of 100

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 uncertain performance in the last few months, the Preferred Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Alupar Investimento

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alupar Investimento SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Banco Do and Alupar Investimento

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

The idea behind Banco do Estado and Alupar Investimento 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.