Correlation Between Banco Bradesco and BJs Wholesale

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

Diversification Opportunities for Banco Bradesco and BJs Wholesale

-0.74

Correlation Coefficient

Banco Bradesco  BJs Wholesale

Pay attention - limited upside

The 3 months correlation between Banco and BJs is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Banco Bradesco SA and BJs Wholesale Club in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BJs Wholesale Club 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 BJs Wholesale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BJs Wholesale Club has no effect on the direction of Banco Bradesco i.e., Banco Bradesco and BJs Wholesale go up and down completely randomly.

Pair Corralation between Banco Bradesco and BJs Wholesale

Given the investment horizon of 90 days Banco Bradesco SA is expected to generate 0.75 times more return on investment than BJs Wholesale. However, Banco Bradesco SA is 1.33 times less risky than BJs Wholesale. It trades about 0.34 of its potential returns per unit of risk. BJs Wholesale Club is currently generating about 0.07 per unit of risk. If you would invest  170.00  in Banco Bradesco SA on October 24, 2024 and sell it today you would earn a total of  16.00  from holding Banco Bradesco SA or generate 9.41% return on investment over 90 days.

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

Banco Bradesco SA  vs.  BJs Wholesale Club

Banco Bradesco SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banco Bradesco SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

BJs Wholesale Club

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BJs Wholesale Club are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile forward-looking indicators, BJs Wholesale revealed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Banco Bradesco and BJs Wholesale

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

The idea behind Banco Bradesco SA and BJs Wholesale Club 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.