Correlation Between BRB Banco and Banco Do

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

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

Diversification Opportunities for BRB Banco and Banco Do

-0.32

Correlation Coefficient

BRB Banco  Banco Do

Very good diversification

The 3 months correlation between BRB and Banco is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding BRB Banco de and Banco do Estado in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco do Estado and BRB Banco 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 BRB Banco de are associated (or correlated) with Banco Do. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco do Estado has no effect on the direction of BRB Banco i.e., BRB Banco and Banco Do go up and down completely randomly.

Pair Corralation between BRB Banco and Banco Do

Assuming the 90 days trading horizon BRB Banco de is expected to under-perform the Banco Do. In addition to that, BRB Banco is 1.01 times more volatile than Banco do Estado. It trades about -0.01 of its total potential returns per unit of risk. Banco do Estado is currently generating about 0.11 per unit of volatility. If you would invest  2,219  in Banco do Estado on December 30, 2024 and sell it today you would earn a total of  451.00  from holding Banco do Estado or generate 20.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

BRB Banco de  vs.  Banco do Estado

BRB Banco de

Risk-Adjusted Performance

Very Weak

Over the last 90 days BRB Banco de has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, BRB Banco is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Banco do Estado

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Banco do Estado are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Banco Do unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BRB Banco and Banco Do

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

The idea behind BRB Banco de and Banco do Estado 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.