Correlation Between Banco De and Middlefield Banc

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

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

Diversification Opportunities for Banco De and Middlefield Banc

-0.5

Correlation Coefficient

Banco De  Middlefield Banc

Very good diversification

The 3 months correlation between Banco and Middlefield is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Banco De Chile and Middlefield Banc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Middlefield Banc and Banco De 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 Banco De Chile are associated (or correlated) with Middlefield Banc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Middlefield Banc has no effect on the direction of Banco De i.e., Banco De and Middlefield Banc go up and down completely randomly.

Pair Corralation between Banco De and Middlefield Banc

Considering the 90-day investment horizon Banco De Chile is expected to generate 0.44 times more return on investment than Middlefield Banc. However, Banco De Chile is 2.25 times less risky than Middlefield Banc. It trades about 0.52 of its potential returns per unit of risk. Middlefield Banc is currently generating about 0.08 per unit of risk. If you would invest  2,156  in Banco De Chile on February 16, 2024 and sell it today you would earn a total of  288.00  from holding Banco De Chile or generate 13.36% return on investment over 90 days.

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

Banco De Chile  vs.  Middlefield Banc

Banco De Chile

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Banco De Chile are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental indicators, Banco De may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Middlefield Banc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Middlefield Banc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Banco De and Middlefield Banc

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

The idea behind Banco De Chile and Middlefield Banc 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.