Correlation Between BTG Pactual and IShares BMFBovespa

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

Diversification Opportunities for BTG Pactual and IShares BMFBovespa

0.2

Correlation Coefficient

BTG Pactual  IShares BMFBovespa

Modest diversification

The 3 months correlation between BTG and IShares is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding BTG Pactual Logstica and iShares BMFBovespa Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares BMFBovespa Small 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 IShares BMFBovespa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares BMFBovespa Small has no effect on the direction of BTG Pactual i.e., BTG Pactual and IShares BMFBovespa go up and down completely randomly.

Pair Corralation between BTG Pactual and IShares BMFBovespa

Assuming the 90 days trading horizon BTG Pactual is expected to generate 3.36 times less return on investment than IShares BMFBovespa. But when comparing it to its historical volatility, BTG Pactual Logstica is 1.88 times less risky than IShares BMFBovespa. It trades about 0.07 of its potential returns per unit of risk. iShares BMFBovespa Small is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  8,547  in iShares BMFBovespa Small on December 24, 2024 and sell it today you would earn a total of  930.00  from holding iShares BMFBovespa Small or generate 10.88% return on investment over 90 days.

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

BTG Pactual Logstica  vs.  iShares BMFBovespa Small

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 5 (%) 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.

iShares BMFBovespa Small

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares BMFBovespa Small are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, IShares BMFBovespa may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with BTG Pactual and IShares BMFBovespa

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

The idea behind BTG Pactual Logstica and iShares BMFBovespa Small 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.