Correlation Between BTG Pactual and MBI Administradora

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

By analyzing existing cross correlation between BTG Pactual Chile and MBI Administradora General, you can compare the effects of market volatilities on BTG Pactual and MBI Administradora 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 MBI Administradora. Check out your portfolio center. Please also check ongoing floating volatility patterns of BTG Pactual and MBI Administradora.

Diversification Opportunities for BTG Pactual and MBI Administradora

-0.71

Correlation Coefficient

BTG Pactual  MBI Administradora

Pay attention - limited upside

The 3 months correlation between BTG and MBI is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding BTG Pactual Chile and MBI Administradora General in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MBI Administradora 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 Chile are associated (or correlated) with MBI Administradora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MBI Administradora has no effect on the direction of BTG Pactual i.e., BTG Pactual and MBI Administradora go up and down completely randomly.

Pair Corralation between BTG Pactual and MBI Administradora

Assuming the 90 days trading horizon BTG Pactual Chile is expected to generate 0.93 times more return on investment than MBI Administradora. However, BTG Pactual Chile is 1.08 times less risky than MBI Administradora. It trades about 0.12 of its potential returns per unit of risk. MBI Administradora General is currently generating about -0.05 per unit of risk. If you would invest  1,097,377  in BTG Pactual Chile on December 25, 2024 and sell it today you would earn a total of  182,623  from holding BTG Pactual Chile or generate 16.64% return on investment over 90 days.

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

BTG Pactual Chile  vs.  MBI Administradora General

BTG Pactual Chile

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BTG Pactual Chile are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. Despite nearly weak technical and fundamental indicators, BTG Pactual reported solid returns over the last few months and may actually be approaching a breakup point.

MBI Administradora

Risk-Adjusted Performance

Very Weak

Over the last 90 days MBI Administradora General has generated negative risk-adjusted returns adding no value to fund investors. Even with latest fragile performance, the Fund's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the fund retail investors.

Pair Trading with BTG Pactual and MBI Administradora

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

The idea behind BTG Pactual Chile and MBI Administradora General 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.