Correlation Between Banco Do and Magazine Luiza

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

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

Diversification Opportunities for Banco Do and Magazine Luiza

0.27

Correlation Coefficient

Banco Do  Magazine Luiza

Modest diversification

The 3 months correlation between Banco and Magazine is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Banco do Brasil and Magazine Luiza SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magazine Luiza SA and Banco Do 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 do Brasil are associated (or correlated) with Magazine Luiza. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magazine Luiza SA has no effect on the direction of Banco Do i.e., Banco Do and Magazine Luiza go up and down completely randomly.

Pair Corralation between Banco Do and Magazine Luiza

Assuming the 90 days trading horizon Banco do Brasil is expected to under-perform the Magazine Luiza. But the stock apears to be less risky and, when comparing its historical volatility, Banco do Brasil is 1.85 times less risky than Magazine Luiza. The stock trades about -0.22 of its potential returns per unit of risk. The Magazine Luiza SA is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  985.00  in Magazine Luiza SA on April 22, 2025 and sell it today you would lose (197.00) from holding Magazine Luiza SA or give up 20.0% of portfolio value over 90 days.

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

Banco do Brasil  vs.  Magazine Luiza SA

Banco do Brasil

Risk-Adjusted Performance

Very Weak

Over the last 90 days Banco do Brasil has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in August 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Magazine Luiza SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Magazine Luiza SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in August 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Banco Do and Magazine Luiza

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

The idea behind Banco do Brasil and Magazine Luiza SA 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.

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 the Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.