Correlation Between Banco Bradesco and Braskem SA
Can any of the company-specific risk be diversified away by investing in both Banco Bradesco and Braskem SA 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 Braskem SA 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 Braskem SA, you can compare the effects of market volatilities on Banco Bradesco and Braskem SA 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 Braskem SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Bradesco and Braskem SA.
Diversification Opportunities for Banco Bradesco and Braskem SA
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Banco and Braskem is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Banco Bradesco SA and Braskem SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Braskem SA 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 Braskem SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Braskem SA has no effect on the direction of Banco Bradesco i.e., Banco Bradesco and Braskem SA go up and down completely randomly.
Pair Corralation between Banco Bradesco and Braskem SA
Assuming the 90 days trading horizon Banco Bradesco SA is expected to generate 0.47 times more return on investment than Braskem SA. However, Banco Bradesco SA is 2.13 times less risky than Braskem SA. It trades about -0.43 of its potential returns per unit of risk. Braskem SA is currently generating about -0.24 per unit of risk. If you would invest 1,411 in Banco Bradesco SA on September 2, 2024 and sell it today you would lose (148.00) from holding Banco Bradesco SA or give up 10.49% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Banco Bradesco SA vs. Braskem SA
Performance |
| Timeline |
| Banco Bradesco SA |
| Braskem SA |
Banco Bradesco and Braskem SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Banco Bradesco and Braskem SA
The main advantage of trading using opposite Banco Bradesco and Braskem SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco Bradesco position performs unexpectedly, Braskem SA 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 Braskem SA will offset losses from the drop in Braskem SA's long position.| Banco Bradesco vs. Banco do Brasil | Banco Bradesco vs. Petrleo Brasileiro SA | Banco Bradesco vs. BB Seguridade Participacoes |
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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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