Correlation Between Petrleo Brasileiro and Banco Bradesco
Can any of the company-specific risk be diversified away by investing in both Petrleo Brasileiro and Banco Bradesco 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 Petrleo Brasileiro and Banco Bradesco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Petrleo Brasileiro SA and Banco Bradesco SA, you can compare the effects of market volatilities on Petrleo Brasileiro and Banco Bradesco 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 Petrleo Brasileiro with a short position of Banco Bradesco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petrleo Brasileiro and Banco Bradesco.
Diversification Opportunities for Petrleo Brasileiro and Banco Bradesco
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Petrleo and Banco is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Petrleo Brasileiro SA and Banco Bradesco SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Bradesco SA and Petrleo Brasileiro 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 Petrleo Brasileiro SA are associated (or correlated) with Banco Bradesco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Bradesco SA has no effect on the direction of Petrleo Brasileiro i.e., Petrleo Brasileiro and Banco Bradesco go up and down completely randomly.
Pair Corralation between Petrleo Brasileiro and Banco Bradesco
Assuming the 90 days trading horizon Petrleo Brasileiro SA is expected to generate 1.03 times more return on investment than Banco Bradesco. However, Petrleo Brasileiro is 1.03 times more volatile than Banco Bradesco SA. It trades about 0.34 of its potential returns per unit of risk. Banco Bradesco SA is currently generating about -0.45 per unit of risk. If you would invest 3,609 in Petrleo Brasileiro SA on August 28, 2024 and sell it today you would earn a total of 309.00 from holding Petrleo Brasileiro SA or generate 8.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Petrleo Brasileiro SA vs. Banco Bradesco SA
Performance |
| Timeline |
| Petrleo Brasileiro |
| Banco Bradesco SA |
Petrleo Brasileiro and Banco Bradesco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Petrleo Brasileiro and Banco Bradesco
The main advantage of trading using opposite Petrleo Brasileiro and Banco Bradesco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petrleo Brasileiro position performs unexpectedly, Banco Bradesco 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 Banco Bradesco will offset losses from the drop in Banco Bradesco's long position.| Petrleo Brasileiro vs. Vale SA | Petrleo Brasileiro vs. Banco do Brasil | Petrleo Brasileiro vs. Banco Bradesco SA | Petrleo Brasileiro vs. Ita Unibanco Holding |
| Banco Bradesco vs. Ita Unibanco Holding | Banco Bradesco vs. Banco do Brasil | Banco Bradesco vs. Itasa Investimentos | Banco Bradesco vs. Petrleo Brasileiro SA |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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