Correlation Between Lupatech and Banco Do
Can any of the company-specific risk be diversified away by investing in both Lupatech and Banco Do 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 Lupatech and Banco Do into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lupatech SA and Banco do Nordeste, you can compare the effects of market volatilities on Lupatech and Banco Do 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 Lupatech with a short position of Banco Do. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lupatech and Banco Do.
Diversification Opportunities for Lupatech and Banco Do
Poor diversification
The 3 months correlation between Lupatech and Banco is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Lupatech SA and Banco do Nordeste in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco do Nordeste and Lupatech 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 Lupatech SA are associated (or correlated) with Banco Do. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco do Nordeste has no effect on the direction of Lupatech i.e., Lupatech and Banco Do go up and down completely randomly.
Pair Corralation between Lupatech and Banco Do
Assuming the 90 days trading horizon Lupatech SA is expected to under-perform the Banco Do. In addition to that, Lupatech is 1.4 times more volatile than Banco do Nordeste. It trades about -0.07 of its total potential returns per unit of risk. Banco do Nordeste is currently generating about 0.06 per unit of volatility. If you would invest 9,200 in Banco do Nordeste on January 25, 2024 and sell it today you would earn a total of 1,200 from holding Banco do Nordeste or generate 13.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lupatech SA vs. Banco do Nordeste
Performance |
| Timeline |
| Lupatech SA |
| Banco do Nordeste |
Lupatech and Banco Do Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lupatech and Banco Do
The main advantage of trading using opposite Lupatech and Banco Do positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lupatech position performs unexpectedly, Banco Do 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 Do will offset losses from the drop in Banco Do's long position.| Lupatech vs. PDG Realty SA | Lupatech vs. Positivo Tecnologia SA | Lupatech vs. Rossi Residencial SA | Lupatech vs. Eternit SA |
| Banco Do vs. Ita Unibanco Holding | Banco Do vs. Ita Unibanco Holding | Banco Do vs. Deutsche Bank Aktiengesellschaft | Banco Do vs. Banco Santander SA |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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