Correlation Between Raia Drogasil and Banco BTG

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

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

Diversification Opportunities for Raia Drogasil and Banco BTG

0.81

Correlation Coefficient

Raia Drogasil  Banco BTG

Very poor diversification

The 3 months correlation between Raia and Banco is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Raia Drogasil SA and Banco BTG Pactual in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco BTG Pactual and Raia Drogasil 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 Raia Drogasil SA are associated (or correlated) with Banco BTG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco BTG Pactual has no effect on the direction of Raia Drogasil i.e., Raia Drogasil and Banco BTG go up and down completely randomly.

Pair Corralation between Raia Drogasil and Banco BTG

Assuming the 90 days trading horizon Raia Drogasil is expected to generate 3.27 times less return on investment than Banco BTG. But when comparing it to its historical volatility, Raia Drogasil SA is 1.34 times less risky than Banco BTG. It trades about 0.02 of its potential returns per unit of risk. Banco BTG Pactual is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,173  in Banco BTG Pactual on September 10, 2024 and sell it today you would earn a total of  888.00  from holding Banco BTG Pactual or generate 40.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.8%
Values	Daily Returns

Raia Drogasil SA  vs.  Banco BTG Pactual

Raia Drogasil SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Raia Drogasil SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Banco BTG Pactual

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banco BTG Pactual has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Raia Drogasil and Banco BTG

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

The idea behind Raia Drogasil SA and Banco BTG Pactual 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.