Correlation Between Companhia and Banco Bradesco
Can any of the company-specific risk be diversified away by investing in both Companhia 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 Companhia and Banco Bradesco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Companhia de Saneamento and Banco Bradesco SA, you can compare the effects of market volatilities on Companhia 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 Companhia with a short position of Banco Bradesco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Companhia and Banco Bradesco.
Diversification Opportunities for Companhia and Banco Bradesco
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Companhia and Banco is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Companhia de Saneamento 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 Companhia 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 Companhia de Saneamento 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 Companhia i.e., Companhia and Banco Bradesco go up and down completely randomly.
Pair Corralation between Companhia and Banco Bradesco
Assuming the 90 days trading horizon Companhia de Saneamento is expected to generate 1.44 times more return on investment than Banco Bradesco. However, Companhia is 1.44 times more volatile than Banco Bradesco SA. It trades about 0.4 of its potential returns per unit of risk. Banco Bradesco SA is currently generating about -0.43 per unit of risk. If you would invest 2,619 in Companhia de Saneamento on September 2, 2024 and sell it today you would earn a total of 406.00 from holding Companhia de Saneamento or generate 15.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Companhia de Saneamento vs. Banco Bradesco SA
Performance |
| Timeline |
| Companhia de Saneamento |
| Banco Bradesco SA |
Companhia and Banco Bradesco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Companhia and Banco Bradesco
The main advantage of trading using opposite Companhia and Banco Bradesco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Companhia 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.| Companhia vs. BB Seguridade Participacoes | Companhia vs. Transmissora Aliana de | Companhia vs. Alupar Investimento SA | Companhia vs. Banco do Estado |
| Banco Bradesco vs. Banco do Brasil | Banco Bradesco vs. Petrleo Brasileiro SA | Banco Bradesco vs. BB Seguridade Participacoes |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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