Correlation Between BTG Pactual and Sumitomo Mitsui

Can any of the company-specific risk be diversified away by investing in both BTG Pactual and Sumitomo Mitsui 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 Sumitomo Mitsui 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 Sumitomo Mitsui Financial, you can compare the effects of market volatilities on BTG Pactual and Sumitomo Mitsui 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 Sumitomo Mitsui. Check out your portfolio center. Please also check ongoing floating volatility patterns of BTG Pactual and Sumitomo Mitsui.

Diversification Opportunities for BTG Pactual and Sumitomo Mitsui

-0.82

Correlation Coefficient

BTG Pactual  Sumitomo Mitsui

Pay attention - limited upside

The 3 months correlation between BTG and Sumitomo is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding BTG Pactual Logstica and Sumitomo Mitsui Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Mitsui Financial 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 Sumitomo Mitsui. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Mitsui Financial has no effect on the direction of BTG Pactual i.e., BTG Pactual and Sumitomo Mitsui go up and down completely randomly.

Pair Corralation between BTG Pactual and Sumitomo Mitsui

Assuming the 90 days trading horizon BTG Pactual Logstica is expected to under-perform the Sumitomo Mitsui. But the fund apears to be less risky and, when comparing its historical volatility, BTG Pactual Logstica is 1.7 times less risky than Sumitomo Mitsui. The fund trades about -0.12 of its potential returns per unit of risk. The Sumitomo Mitsui Financial is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  7,069  in Sumitomo Mitsui Financial on September 14, 2024 and sell it today you would earn a total of  1,967  from holding Sumitomo Mitsui Financial or generate 27.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.16%
Values	Daily Returns

BTG Pactual Logstica  vs.  Sumitomo Mitsui Financial

BTG Pactual Logstica

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BTG Pactual Logstica has generated negative risk-adjusted returns adding no value to fund investors. Despite latest weak performance, the Fund's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Sumitomo Mitsui Financial

Risk-Adjusted Performance

16 of 100

Solid

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

Pair Trading with BTG Pactual and Sumitomo Mitsui

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

The idea behind BTG Pactual Logstica and Sumitomo Mitsui Financial 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.

Check out your portfolio center.

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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.