Correlation Between Banco Do and Companhia

Can any of the company-specific risk be diversified away by investing in both Banco Do and Companhia 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 Companhia 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 Companhia de Saneamento, you can compare the effects of market volatilities on Banco Do and Companhia 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 Companhia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Do and Companhia.

Diversification Opportunities for Banco Do and Companhia

-0.88

Correlation Coefficient

Banco Do  Companhia

Pay attention - limited upside

The 3 months correlation between Banco and Companhia is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Banco do Brasil and Companhia de Saneamento in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia de Saneamento 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 Companhia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia de Saneamento has no effect on the direction of Banco Do i.e., Banco Do and Companhia go up and down completely randomly.

Pair Corralation between Banco Do and Companhia

Assuming the 90 days trading horizon Banco do Brasil is expected to under-perform the Companhia. In addition to that, Banco Do is 1.21 times more volatile than Companhia de Saneamento. It trades about -0.24 of its total potential returns per unit of risk. Companhia de Saneamento is currently generating about 0.18 per unit of volatility. If you would invest  2,919  in Companhia de Saneamento on April 24, 2025 and sell it today you would earn a total of  595.00  from holding Companhia de Saneamento or generate 20.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Banco do Brasil  vs.  Companhia de Saneamento

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 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.

Companhia de Saneamento

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Companhia de Saneamento are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Companhia sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Banco Do and Companhia

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

The idea behind Banco do Brasil and Companhia de Saneamento 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 CEOs Directory module to screen CEOs from public companies around the world.