Correlation Between BTG Pactual and HUSI11

Can any of the company-specific risk be diversified away by investing in both BTG Pactual and HUSI11 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 BTG Pactual and HUSI11 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BTG Pactual Logstica and HUSI11, you can compare the effects of market volatilities on BTG Pactual and HUSI11 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 BTG Pactual with a short position of HUSI11. Check out your portfolio center. Please also check ongoing floating volatility patterns of BTG Pactual and HUSI11.

Diversification Opportunities for BTG Pactual and HUSI11

0.02

Correlation Coefficient

BTG Pactual  HUSI11

Significant diversification

The 3 months correlation between BTG and HUSI11 is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding BTG Pactual Logstica and HUSI11 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUSI11 and BTG Pactual 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 BTG Pactual Logstica are associated (or correlated) with HUSI11. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HUSI11 has no effect on the direction of BTG Pactual i.e., BTG Pactual and HUSI11 go up and down completely randomly.

Pair Corralation between BTG Pactual and HUSI11

Assuming the 90 days trading horizon BTG Pactual is expected to generate 1.32 times less return on investment than HUSI11. But when comparing it to its historical volatility, BTG Pactual Logstica is 4.62 times less risky than HUSI11. It trades about 0.09 of its potential returns per unit of risk. HUSI11 is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  120,809  in HUSI11 on December 30, 2024 and sell it today you would earn a total of  2,191  from holding HUSI11 or generate 1.81% return on investment over 90 days.

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

BTG Pactual Logstica  vs.  HUSI11

BTG Pactual Logstica

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BTG Pactual Logstica are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong essential indicators, BTG Pactual is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

HUSI11

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HUSI11 are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, HUSI11 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with BTG Pactual and HUSI11

The main advantage of trading using opposite BTG Pactual and HUSI11 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BTG Pactual position performs unexpectedly, HUSI11 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 HUSI11 will offset losses from the drop in HUSI11's long position.

The idea behind BTG Pactual Logstica and HUSI11 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.