Correlation Between Rumo SA and Banco BTG

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

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

Diversification Opportunities for Rumo SA and Banco BTG

0.76

Correlation Coefficient

Rumo SA  Banco BTG

Poor diversification

The 3 months correlation between Rumo and Banco is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Rumo 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 Rumo SA 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 Rumo 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 Rumo SA i.e., Rumo SA and Banco BTG go up and down completely randomly.

Pair Corralation between Rumo SA and Banco BTG

Assuming the 90 days trading horizon Rumo SA is expected to generate 1.01 times more return on investment than Banco BTG. However, Rumo SA is 1.01 times more volatile than Banco BTG Pactual. It trades about -0.05 of its potential returns per unit of risk. Banco BTG Pactual is currently generating about -0.09 per unit of risk. If you would invest  2,116  in Rumo SA on September 13, 2024 and sell it today you would lose (130.00) from holding Rumo SA or give up 6.14% of portfolio value over 90 days.

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

Rumo SA  vs.  Banco BTG Pactual

Rumo SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rumo SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Rumo SA is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the 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 latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Rumo SA and Banco BTG

The main advantage of trading using opposite Rumo SA and Banco BTG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rumo SA 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 Rumo 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..