Correlation Between Bank First and BRASIL ON

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Can any of the company-specific risk be diversified away by investing in both Bank First and BRASIL ON 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 Bank First and BRASIL ON into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank First National and BRASIL ON NM, you can compare the effects of market volatilities on Bank First and BRASIL ON 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 Bank First with a short position of BRASIL ON. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank First and BRASIL ON.

Diversification Opportunities for Bank First and BRASIL ON

0.69
  Correlation Coefficient

Poor diversification

The 3 months correlation between Bank First and BRASIL is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Bank First National and BRASIL ON NM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRASIL ON NM and Bank First 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 Bank First National are associated (or correlated) with BRASIL ON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRASIL ON NM has no effect on the direction of Bank First i.e., Bank First and BRASIL ON go up and down completely randomly.

Pair Corralation between Bank First and BRASIL ON

Considering the 90-day investment horizon Bank First is expected to generate 1.75 times less return on investment than BRASIL ON. But when comparing it to its historical volatility, Bank First National is 1.4 times less risky than BRASIL ON. It trades about 0.04 of its potential returns per unit of risk. BRASIL ON NM is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,801  in BRASIL ON NM on July 6, 2022 and sell it today you would earn a total of  1,345  from holding BRASIL ON NM or generate 48.02% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy98.59%
ValuesDaily Returns

Bank First National  vs.  BRASIL ON NM

 Performance (%) 
       Timeline  
Bank First National 
Bank First Performance
0 of 100
Over the last 90 days Bank First National has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Bank First is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Bank First Price Channel

BRASIL ON NM 
BRASIL Performance
14 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in BRASIL ON NM are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, BRASIL ON reported solid returns over the last few months and may actually be approaching a breakup point.

BRASIL Price Channel

Bank First and BRASIL ON Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Bank First and BRASIL ON

The main advantage of trading using opposite Bank First and BRASIL ON positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank First position performs unexpectedly, BRASIL ON 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 BRASIL ON will offset losses from the drop in BRASIL ON's long position.
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The idea behind Bank First National and BRASIL ON NM 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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Check out your portfolio center. 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.

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