Correlation Between Banco Do and Bank of the

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

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

Diversification Opportunities for Banco Do and Bank of the

0.46

Correlation Coefficient

Banco Do  Bank of the

Very weak diversification

The 3 months correlation between Banco and Bank is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Banco do Brasil and Bank of the in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of the and Banco Do 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 do Brasil are associated (or correlated) with Bank of the. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of the has no effect on the direction of Banco Do i.e., Banco Do and Bank of the go up and down completely randomly.

Pair Corralation between Banco Do and Bank of the

Assuming the 90 days trading horizon Banco do Brasil is expected to under-perform the Bank of the. But the stock apears to be less risky and, when comparing its historical volatility, Banco do Brasil is 2.41 times less risky than Bank of the. The stock trades about -0.04 of its potential returns per unit of risk. The Bank of the is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  4,303  in Bank of the on January 25, 2024 and sell it today you would earn a total of  162.00  from holding Bank of the or generate 3.76% return on investment over 90 days.

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

Banco do Brasil  vs.  Bank of the

Banco do Brasil

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Banco do Brasil are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Banco Do is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Bank of the

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of the are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Bank of the showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Banco Do and Bank of the

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

The idea behind Banco do Brasil and Bank of the 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.