Correlation Between Banco Macro and First Bancorp

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

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

Diversification Opportunities for Banco Macro and First Bancorp

-0.6

Correlation Coefficient

Banco Macro  First Bancorp

Excellent diversification

The 3 months correlation between Banco and First is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Banco Macro SA and First Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Bancorp and Banco Macro 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 Macro SA are associated (or correlated) with First Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Bancorp has no effect on the direction of Banco Macro i.e., Banco Macro and First Bancorp go up and down completely randomly.

Pair Corralation between Banco Macro and First Bancorp

Considering the 90-day investment horizon Banco Macro SA is expected to generate 2.02 times more return on investment than First Bancorp. However, Banco Macro is 2.02 times more volatile than First Bancorp. It trades about 0.14 of its potential returns per unit of risk. First Bancorp is currently generating about -0.02 per unit of risk. If you would invest  2,334  in Banco Macro SA on January 24, 2024 and sell it today you would earn a total of  2,993  from holding Banco Macro SA or generate 128.23% return on investment over 90 days.

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

Banco Macro SA  vs.  First Bancorp

Banco Macro SA

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Macro SA are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent primary indicators, Banco Macro sustained solid returns over the last few months and may actually be approaching a breakup point.

First Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's essential indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Banco Macro and First Bancorp

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

The idea behind Banco Macro SA and First Bancorp 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.