Correlation Between Banco Bradesco and Citizens Financial

Can any of the company-specific risk be diversified away by investing in both Banco Bradesco and Citizens Financial 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 Citizens Financial 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 Citizens Financial Corp, you can compare the effects of market volatilities on Banco Bradesco and Citizens Financial 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 Citizens Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Bradesco and Citizens Financial.

Diversification Opportunities for Banco Bradesco and Citizens Financial

0.68

Correlation Coefficient

Banco Bradesco  Citizens Financial

Poor diversification

The 3 months correlation between Banco and Citizens is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Banco Bradesco SA and Citizens Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citizens Financial Corp 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 Citizens Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citizens Financial Corp has no effect on the direction of Banco Bradesco i.e., Banco Bradesco and Citizens Financial go up and down completely randomly.

Pair Corralation between Banco Bradesco and Citizens Financial

Considering the 90-day investment horizon Banco Bradesco SA is expected to generate 1.59 times more return on investment than Citizens Financial. However, Banco Bradesco is 1.59 times more volatile than Citizens Financial Corp. It trades about 0.15 of its potential returns per unit of risk. Citizens Financial Corp is currently generating about 0.05 per unit of risk. If you would invest  186.00  in Banco Bradesco SA on December 25, 2024 and sell it today you would earn a total of  36.00  from holding Banco Bradesco SA or generate 19.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	79.66%
Values	Daily Returns

Banco Bradesco SA  vs.  Citizens Financial Corp

Banco Bradesco SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Bradesco SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental drivers, Banco Bradesco exhibited solid returns over the last few months and may actually be approaching a breakup point.

Citizens Financial Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Citizens Financial Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Citizens Financial is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Banco Bradesco and Citizens Financial

The main advantage of trading using opposite Banco Bradesco and Citizens Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco Bradesco position performs unexpectedly, Citizens Financial 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 Citizens Financial will offset losses from the drop in Citizens Financial's long position.

The idea behind Banco Bradesco SA and Citizens Financial Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.