Correlation Between CF Bankshares and Banco Macro

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

By analyzing existing cross correlation between CF Bankshares and Banco Macro SA, you can compare the effects of market volatilities on CF Bankshares and Banco Macro 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 CF Bankshares with a short position of Banco Macro. Check out your portfolio center. Please also check ongoing floating volatility patterns of CF Bankshares and Banco Macro.

Diversification Opportunities for CF Bankshares and Banco Macro

0.84

Correlation Coefficient

CF Bankshares  Banco Macro

Very poor diversification

The 3 months correlation between CFBK and Banco is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding CF Bankshares and Banco Macro SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Macro SA and CF Bankshares 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 CF Bankshares are associated (or correlated) with Banco Macro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Macro SA has no effect on the direction of CF Bankshares i.e., CF Bankshares and Banco Macro go up and down completely randomly.

Pair Corralation between CF Bankshares and Banco Macro

Given the investment horizon of 90 days CF Bankshares is expected to generate 1.05 times less return on investment than Banco Macro. But when comparing it to its historical volatility, CF Bankshares is 1.19 times less risky than Banco Macro. It trades about 0.18 of its potential returns per unit of risk. Banco Macro SA is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  6,449  in Banco Macro SA on September 4, 2024 and sell it today you would earn a total of  2,041  from holding Banco Macro SA or generate 31.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

CF Bankshares  vs.  Banco Macro SA

CF Bankshares

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CF Bankshares are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady fundamental drivers, CF Bankshares disclosed solid returns over the last few months and may actually be approaching a breakup point.

Banco Macro SA

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Macro SA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal primary indicators, Banco Macro sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CF Bankshares and Banco Macro

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

The idea behind CF Bankshares and Banco Macro 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.

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.