Correlation Between Banco Bradesco and Lloyds Banking

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

Diversification Opportunities for Banco Bradesco and Lloyds Banking

0.67

Correlation Coefficient

Banco Bradesco  Lloyds Banking

Poor diversification

The 3 months correlation between Banco and Lloyds is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Banco Bradesco SA and Lloyds Banking Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lloyds Banking Group 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 Lloyds Banking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lloyds Banking Group has no effect on the direction of Banco Bradesco i.e., Banco Bradesco and Lloyds Banking go up and down completely randomly.

Pair Corralation between Banco Bradesco and Lloyds Banking

Considering the 90-day investment horizon Banco Bradesco is expected to generate 1.48 times less return on investment than Lloyds Banking. In addition to that, Banco Bradesco is 1.06 times more volatile than Lloyds Banking Group. It trades about 0.18 of its total potential returns per unit of risk. Lloyds Banking Group is currently generating about 0.29 per unit of volatility. If you would invest  270.00  in Lloyds Banking Group on December 27, 2024 and sell it today you would earn a total of  114.00  from holding Lloyds Banking Group or generate 42.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Banco Bradesco SA  vs.  Lloyds Banking Group

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 14 (%) 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.

Lloyds Banking Group

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lloyds Banking Group are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Lloyds Banking reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Banco Bradesco and Lloyds Banking

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

The idea behind Banco Bradesco SA and Lloyds Banking Group 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.