Correlation Between Banco Bradesco and Financial Institutions
Can any of the company-specific risk be diversified away by investing in both Banco Bradesco and Financial Institutions 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 Financial Institutions into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Banco Bradesco SA and Financial Institutions, you can compare the effects of market volatilities on Banco Bradesco and Financial Institutions 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 Financial Institutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Bradesco and Financial Institutions.
Diversification Opportunities for Banco Bradesco and Financial Institutions
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Banco and Financial is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Banco Bradesco SA and Financial Institutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Institutions 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 SA are associated (or correlated) with Financial Institutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial Institutions has no effect on the direction of Banco Bradesco i.e., Banco Bradesco and Financial Institutions go up and down completely randomly.
Pair Corralation between Banco Bradesco and Financial Institutions
Considering the 90-day investment horizon Banco Bradesco SA is expected to under-perform the Financial Institutions. But the stock apears to be less risky and, when comparing its historical volatility, Banco Bradesco SA is 1.24 times less risky than Financial Institutions. The stock trades about -0.04 of its potential returns per unit of risk. The Financial Institutions is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,655 in Financial Institutions on August 24, 2024 and sell it today you would earn a total of 1,128 from holding Financial Institutions or generate 68.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Banco Bradesco SA vs. Financial Institutions
Performance |
| Timeline |
| Banco Bradesco SA |
| Financial Institutions |
Banco Bradesco and Financial Institutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Banco Bradesco and Financial Institutions
The main advantage of trading using opposite Banco Bradesco and Financial Institutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco Bradesco position performs unexpectedly, Financial Institutions 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 Financial Institutions will offset losses from the drop in Financial Institutions' long position.| Banco Bradesco vs. Banco Santander Brasil | Banco Bradesco vs. Banco Macro SA | Banco Bradesco vs. Lloyds Banking Group | Banco Bradesco vs. Grupo Financiero Galicia |
| Financial Institutions vs. Banco Bradesco SA | Financial Institutions vs. Itau Unibanco Banco | Financial Institutions vs. Banco Santander Brasil | Financial Institutions vs. Western Alliance Bancorporation |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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