Correlation Between Banco Bradesco and Grupo Financiero

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

Diversification Opportunities for Banco Bradesco and Grupo Financiero

-0.03

Correlation Coefficient

Banco Bradesco  Grupo Financiero

Good diversification

The 3 months correlation between Banco and Grupo is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Banco Bradesco SA and Grupo Financiero Inbursa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Financiero Inbursa 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 Grupo Financiero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Financiero Inbursa has no effect on the direction of Banco Bradesco i.e., Banco Bradesco and Grupo Financiero go up and down completely randomly.

Pair Corralation between Banco Bradesco and Grupo Financiero

Assuming the 90 days trading horizon Banco Bradesco SA is expected to generate 0.62 times more return on investment than Grupo Financiero. However, Banco Bradesco SA is 1.62 times less risky than Grupo Financiero. It trades about 0.11 of its potential returns per unit of risk. Grupo Financiero Inbursa is currently generating about 0.0 per unit of risk. If you would invest  1,150  in Banco Bradesco SA on December 29, 2024 and sell it today you would earn a total of  134.00  from holding Banco Bradesco SA or generate 11.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

Banco Bradesco SA  vs.  Grupo Financiero Inbursa

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 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Banco Bradesco may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Grupo Financiero Inbursa

Risk-Adjusted Performance

Very Weak

Over the last 90 days Grupo Financiero Inbursa has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Grupo Financiero is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Banco Bradesco and Grupo Financiero

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

The idea behind Banco Bradesco SA and Grupo Financiero Inbursa 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.