Correlation Between Mxima Renda and Banco Do

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

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

Diversification Opportunities for Mxima Renda and Banco Do

-0.56

Correlation Coefficient

Mxima Renda  Banco Do

Excellent diversification

The 3 months correlation between Mxima and Banco is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Mxima Renda Corporativa and Banco do Estado in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco do Estado and Mxima Renda 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 Mxima Renda Corporativa 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 Estado has no effect on the direction of Mxima Renda i.e., Mxima Renda and Banco Do go up and down completely randomly.

Pair Corralation between Mxima Renda and Banco Do

Assuming the 90 days trading horizon Mxima Renda Corporativa is expected to under-perform the Banco Do. But the fund apears to be less risky and, when comparing its historical volatility, Mxima Renda Corporativa is 1.11 times less risky than Banco Do. The fund trades about -0.45 of its potential returns per unit of risk. The Banco do Estado is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  1,329  in Banco do Estado on February 3, 2024 and sell it today you would lose (56.00) from holding Banco do Estado or give up 4.21% of portfolio value over 90 days.

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

Mxima Renda Corporativa  vs.  Banco do Estado

Mxima Renda Corporativa

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mxima Renda Corporativa are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat weak basic indicators, Mxima Renda may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Banco do Estado

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banco do Estado 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.

Pair Trading with Mxima Renda and Banco Do

The main advantage of trading using opposite Mxima Renda and Banco Do positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mxima Renda 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.

The idea behind Mxima Renda Corporativa and Banco do Estado 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.