Correlation Between Banco Bradesco and BEO Bancorp
Can any of the company-specific risk be diversified away by investing in both Banco Bradesco and BEO Bancorp 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 BEO Bancorp 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 BEO Bancorp, you can compare the effects of market volatilities on Banco Bradesco and BEO Bancorp 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 BEO Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Bradesco and BEO Bancorp.
Diversification Opportunities for Banco Bradesco and BEO Bancorp
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Banco and BEO is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Banco Bradesco SA and BEO Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BEO Bancorp 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 BEO Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BEO Bancorp has no effect on the direction of Banco Bradesco i.e., Banco Bradesco and BEO Bancorp go up and down completely randomly.
Pair Corralation between Banco Bradesco and BEO Bancorp
Assuming the 90 days trading horizon Banco Bradesco is expected to generate 12.18 times less return on investment than BEO Bancorp. But when comparing it to its historical volatility, Banco Bradesco SA is 1.29 times less risky than BEO Bancorp. It trades about 0.01 of its potential returns per unit of risk. BEO Bancorp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 3,752 in BEO Bancorp on November 1, 2024 and sell it today you would earn a total of 4,498 from holding BEO Bancorp or generate 119.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 87.5% |
| Values | Daily Returns |
Banco Bradesco SA vs. BEO Bancorp
Performance |
| Timeline |
| Banco Bradesco SA |
| BEO Bancorp |
Banco Bradesco and BEO Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Banco Bradesco and BEO Bancorp
The main advantage of trading using opposite Banco Bradesco and BEO Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco Bradesco position performs unexpectedly, BEO Bancorp 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 BEO Bancorp will offset losses from the drop in BEO Bancorp's long position.| Banco Bradesco vs. Ita Unibanco Holding | Banco Bradesco vs. Banco do Brasil | Banco Bradesco vs. Itasa Investimentos | Banco Bradesco vs. Petrleo Brasileiro SA |
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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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