Correlation Between Banco Bradesco and China Merchants
Can any of the company-specific risk be diversified away by investing in both Banco Bradesco and China Merchants 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 China Merchants 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 China Merchants Bank, you can compare the effects of market volatilities on Banco Bradesco and China Merchants 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 China Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Bradesco and China Merchants.
Diversification Opportunities for Banco Bradesco and China Merchants
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Banco and China is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Banco Bradesco SA and China Merchants Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Merchants Bank 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 China Merchants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Merchants Bank has no effect on the direction of Banco Bradesco i.e., Banco Bradesco and China Merchants go up and down completely randomly.
Pair Corralation between Banco Bradesco and China Merchants
Assuming the 90 days trading horizon Banco Bradesco SA is expected to generate 0.49 times more return on investment than China Merchants. However, Banco Bradesco SA is 2.04 times less risky than China Merchants. It trades about -0.39 of its potential returns per unit of risk. China Merchants Bank is currently generating about -0.23 per unit of risk. If you would invest 1,518 in Banco Bradesco SA on August 27, 2024 and sell it today you would lose (138.00) from holding Banco Bradesco SA or give up 9.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 90.48% |
| Values | Daily Returns |
Banco Bradesco SA vs. China Merchants Bank
Performance |
| Timeline |
| Banco Bradesco SA |
| China Merchants Bank |
Banco Bradesco and China Merchants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Banco Bradesco and China Merchants
The main advantage of trading using opposite Banco Bradesco and China Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco Bradesco position performs unexpectedly, China Merchants 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 China Merchants will offset losses from the drop in China Merchants' 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 |
| China Merchants vs. China Everbright Bank | China Merchants vs. China Merchants Bank | China Merchants vs. Postal Savings Bank | China Merchants vs. China Citic Bank |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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