Can any of the company-specific risk be diversified away by investing in both Banestes and BRB Banco 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 Banestes and BRB Banco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Banestes SA and BRB Banco de, you can compare the effects of market volatilities on Banestes and BRB Banco 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 Banestes with a short position of BRB Banco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banestes and BRB Banco.
Diversification Opportunities for Banestes and BRB Banco
The 3 months correlation between Banestes and BRB is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Banestes SA and BRB Banco de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRB Banco de and Banestes 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 Banestes SA are associated (or correlated) with BRB Banco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRB Banco de has no effect on the direction of Banestes i.e., Banestes and BRB Banco go up and down completely randomly.
Assuming the 90 days trading horizon Banestes SA is expected to generate 0.41 times more return on investment than BRB Banco. However, Banestes SA is 2.44 times less risky than BRB Banco. It trades about 0.11 of its potential returns per unit of risk. BRB Banco de is currently generating about -0.03 per unit of risk. If you would invest 432.00 in Banestes SA on March 6, 2024 and sell it today you would earn a total of 441.00 from holding Banestes SA or generate 102.08% return on investment over 90 days.
Over the last 90 days Banestes SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Banestes is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.
Over the last 90 days BRB Banco de 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.