Correlation Between IA Financial and BB Seguridade

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

By analyzing existing cross correlation between iA Financial and BB Seguridade Participacoes, you can compare the effects of market volatilities on IA Financial and BB Seguridade 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 IA Financial with a short position of BB Seguridade. Check out your portfolio center. Please also check ongoing floating volatility patterns of IA Financial and BB Seguridade.

Diversification Opportunities for IA Financial and BB Seguridade

-0.82

Correlation Coefficient

IA Financial  BB Seguridade

Pay attention - limited upside

The 3 months correlation between IAFNF and BBSEY is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding iA Financial and BB Seguridade Participacoes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BB Seguridade Partic and IA Financial 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 iA Financial are associated (or correlated) with BB Seguridade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BB Seguridade Partic has no effect on the direction of IA Financial i.e., IA Financial and BB Seguridade go up and down completely randomly.

Pair Corralation between IA Financial and BB Seguridade

Assuming the 90 days horizon iA Financial is expected to generate 1.13 times more return on investment than BB Seguridade. However, IA Financial is 1.13 times more volatile than BB Seguridade Participacoes. It trades about 0.2 of its potential returns per unit of risk. BB Seguridade Participacoes is currently generating about -0.14 per unit of risk. If you would invest  7,599  in iA Financial on August 31, 2024 and sell it today you would earn a total of  1,731  from holding iA Financial or generate 22.78% return on investment over 90 days.

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

iA Financial  vs.  BB Seguridade Participacoes

iA Financial

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iA Financial are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, IA Financial reported solid returns over the last few months and may actually be approaching a breakup point.

BB Seguridade Partic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BB Seguridade Participacoes has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with IA Financial and BB Seguridade

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

The idea behind iA Financial and BB Seguridade Participacoes 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.