Correlation Between Alfa Holdings and Banco Da

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

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

Diversification Opportunities for Alfa Holdings and Banco Da

-0.64

Correlation Coefficient

Alfa Holdings  Banco Da

Excellent diversification

The 3 months correlation between Alfa and Banco is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Alfa Holdings SA and Banco da Amaznia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco da Amaznia and Alfa Holdings 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 Alfa Holdings SA are associated (or correlated) with Banco Da. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco da Amaznia has no effect on the direction of Alfa Holdings i.e., Alfa Holdings and Banco Da go up and down completely randomly.

Pair Corralation between Alfa Holdings and Banco Da

Assuming the 90 days trading horizon Alfa Holdings SA is expected to generate 5.73 times more return on investment than Banco Da. However, Alfa Holdings is 5.73 times more volatile than Banco da Amaznia. It trades about 0.31 of its potential returns per unit of risk. Banco da Amaznia is currently generating about 0.18 per unit of risk. If you would invest  700.00  in Alfa Holdings SA on October 22, 2024 and sell it today you would earn a total of  189.00  from holding Alfa Holdings SA or generate 27.0% return on investment over 90 days.

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

Alfa Holdings SA  vs.  Banco da Amaznia

Alfa Holdings SA

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alfa Holdings SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Alfa Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Banco da Amaznia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banco da Amaznia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Banco Da is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Alfa Holdings and Banco Da

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

The idea behind Alfa Holdings SA and Banco da Amaznia 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.