Correlation Between Banco Bradesco and BBVA Banco
Can any of the company-specific risk be diversified away by investing in both Banco Bradesco and BBVA Banco 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 Bradesco and BBVA Banco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Banco Bradesco DRC and BBVA Banco Frances, you can compare the effects of market volatilities on Banco Bradesco and BBVA Banco 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 Bradesco with a short position of BBVA Banco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Bradesco and BBVA Banco.
Diversification Opportunities for Banco Bradesco and BBVA Banco
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Banco and BBVA is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Banco Bradesco DRC and BBVA Banco Frances in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BBVA Banco Frances and Banco Bradesco 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 Bradesco DRC are associated (or correlated) with BBVA Banco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BBVA Banco Frances has no effect on the direction of Banco Bradesco i.e., Banco Bradesco and BBVA Banco go up and down completely randomly.
Pair Corralation between Banco Bradesco and BBVA Banco
Assuming the 90 days trading horizon Banco Bradesco DRC is expected to under-perform the BBVA Banco. But the stock apears to be less risky and, when comparing its historical volatility, Banco Bradesco DRC is 1.82 times less risky than BBVA Banco. The stock trades about -0.16 of its potential returns per unit of risk. The BBVA Banco Frances is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 455,000 in BBVA Banco Frances on November 2, 2024 and sell it today you would earn a total of 440,000 from holding BBVA Banco Frances or generate 96.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.04% |
| Values | Daily Returns |
Banco Bradesco DRC vs. BBVA Banco Frances
Performance |
| Timeline |
| Banco Bradesco DRC |
| BBVA Banco Frances |
Banco Bradesco and BBVA Banco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Banco Bradesco and BBVA Banco
The main advantage of trading using opposite Banco Bradesco and BBVA Banco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco Bradesco position performs unexpectedly, BBVA Banco 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 BBVA Banco will offset losses from the drop in BBVA Banco's long position.| Banco Bradesco vs. Compania de Transporte | Banco Bradesco vs. Harmony Gold Mining | Banco Bradesco vs. Transportadora de Gas | Banco Bradesco vs. Telecom Argentina |
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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 the Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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