Correlation Between Banco Bradesco and Bank Negara

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

Diversification Opportunities for Banco Bradesco and Bank Negara

-0.31

Correlation Coefficient

Banco Bradesco  Bank Negara

Very good diversification

The 3 months correlation between Banco and Bank is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Banco Bradesco SA and Bank Negara Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Negara Indonesia 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 Bank Negara. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Negara Indonesia has no effect on the direction of Banco Bradesco i.e., Banco Bradesco and Bank Negara go up and down completely randomly.

Pair Corralation between Banco Bradesco and Bank Negara

Considering the 90-day investment horizon Banco Bradesco SA is expected to generate 0.38 times more return on investment than Bank Negara. However, Banco Bradesco SA is 2.62 times less risky than Bank Negara. It trades about 0.18 of its potential returns per unit of risk. Bank Negara Indonesia is currently generating about 0.01 per unit of risk. If you would invest  184.00  in Banco Bradesco SA on December 27, 2024 and sell it today you would earn a total of  48.00  from holding Banco Bradesco SA or generate 26.09% return on investment over 90 days.

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

Banco Bradesco SA  vs.  Bank Negara Indonesia

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.

Bank Negara Indonesia

Risk-Adjusted Performance

Weak

Over the last 90 days Bank Negara Indonesia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Bank Negara is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Banco Bradesco and Bank Negara

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

The idea behind Banco Bradesco SA and Bank Negara Indonesia 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.