Correlation Between JS Real and Banco Do

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

Diversification Opportunities for JS Real and Banco Do

0.78
  Correlation Coefficient

Poor diversification

The 3 months correlation between JSRE11 and Banco is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding JS Real Estate and Banco Do Brasil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Do Brasil and JS Real 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 JS Real Estate 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 Brasil has no effect on the direction of JS Real i.e., JS Real and Banco Do go up and down completely randomly.

Pair Corralation between JS Real and Banco Do

Assuming the 90 days trading horizon JS Real Estate is expected to under-perform the Banco Do. But the etf apears to be less risky and, when comparing its historical volatility, JS Real Estate is 2.0 times less risky than Banco Do. The etf trades about -0.02 of its potential returns per unit of risk. The Banco Do Brasil is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3,221  in Banco Do Brasil on September 5, 2022 and sell it today you would earn a total of  382.00  from holding Banco Do Brasil or generate 11.86% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

JS Real Estate  vs.  Banco Do Brasil

 Performance (%) 
       Timeline  
JS Real Estate 
JSRE11 Performance
0 of 100
Over the last 90 days JS Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Etf's basic indicators remain somewhat strong which may send shares a bit higher in January 2023. The current disturbance may also be a sign of long term up-swing for the ETF investors.

JSRE11 Price Channel

Banco Do Brasil 
Banco Performance
0 of 100
Over the last 90 days Banco Do Brasil has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Banco Price Channel

JS Real and Banco Do Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with JS Real and Banco Do

The main advantage of trading using opposite JS Real and Banco Do positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JS Real 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 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 JS Real 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. JS Real'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, JS Real'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 JS Real Estate.
The idea behind JS Real Estate and Banco Do Brasil 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 Fund Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.

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