Correlation Between Fifth Third and BRASIL ON

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

Diversification Opportunities for Fifth Third and BRASIL ON

0.06
  Correlation Coefficient

Significant diversification

The 3 months correlation between Fifth and BRASIL is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Fifth Third Bancorp 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 Fifth Third 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 Fifth Third Bancorp 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 Fifth Third i.e., Fifth Third and BRASIL ON go up and down completely randomly.

Pair Corralation between Fifth Third and BRASIL ON

Assuming the 90 days horizon Fifth Third Bancorp is expected to generate 0.75 times more return on investment than BRASIL ON. However, Fifth Third Bancorp is 1.34 times less risky than BRASIL ON. It trades about -0.12 of its potential returns per unit of risk. BRASIL ON NM is currently generating about -0.25 per unit of risk. If you would invest  2,506  in Fifth Third Bancorp on March 31, 2022 and sell it today you would lose (66.00)  from holding Fifth Third Bancorp or give up 2.63% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy95.24%
ValuesDaily Returns

Fifth Third Bancorp  vs.  BRASIL ON NM

 Performance (%) 
      Timeline 
Fifth Third Bancorp 
Fifth Performance
0 of 100
Over the last 90 days Fifth Third Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental drivers, Fifth Third is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the insiders.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0611
Payout Ratio
0.0155
Forward Annual Dividend Rate
1.5
Dividend Date
2022-03-31
Ex Dividend Date
2022-06-27

Fifth Price Channel

BRASIL ON NM 
BRASIL Performance
0 of 100
Over the last 90 days BRASIL ON NM has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, BRASIL ON is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

BRASIL Price Channel

Fifth Third and BRASIL ON Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Fifth Third and BRASIL ON

The main advantage of trading using opposite Fifth Third and BRASIL ON positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fifth Third 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.

Fifth Third Bancorp

Pair trading matchups for Fifth Third

The idea behind Fifth Third Bancorp 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.

BRASIL ON NM

Pair trading matchups for BRASIL ON

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The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against BRASIL ON as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. BRASIL ON's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, BRASIL ON's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to BRASIL ON NM.
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 Shere Portfolio module to track or share privately all of your investments from the convenience of any device.

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