Correlation Between Banco Bradesco and Banestes

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

Diversification Opportunities for Banco Bradesco and Banestes

0.08

Correlation Coefficient

Banco Bradesco  Banestes

Significant diversification

The 3 months correlation between Banco and Banestes is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Banco Bradesco SA and Banestes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banestes SA 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 Banestes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banestes SA has no effect on the direction of Banco Bradesco i.e., Banco Bradesco and Banestes go up and down completely randomly.

Pair Corralation between Banco Bradesco and Banestes

Assuming the 90 days trading horizon Banco Bradesco SA is expected to generate 1.76 times more return on investment than Banestes. However, Banco Bradesco is 1.76 times more volatile than Banestes SA . It trades about 0.13 of its potential returns per unit of risk. Banestes SA is currently generating about 0.05 per unit of risk. If you would invest  1,129  in Banco Bradesco SA on December 26, 2024 and sell it today you would earn a total of  157.00  from holding Banco Bradesco SA or generate 13.91% return on investment over 90 days.

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

Banco Bradesco SA  vs.  Banestes SA

Banco Bradesco SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Bradesco SA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Banco Bradesco unveiled solid returns over the last few months and may actually be approaching a breakup point.

Banestes SA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Banestes SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Banestes is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Banco Bradesco and Banestes

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

The idea behind Banco Bradesco SA and Banestes SA 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.