Correlation Between Banco Bradesco and CrossFirst Bankshares

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

Diversification Opportunities for Banco Bradesco and CrossFirst Bankshares

-0.28

Correlation Coefficient

Banco Bradesco  CrossFirst Bankshares

Very good diversification

The 3 months correlation between Banco and CrossFirst is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Banco Bradesco SA and CrossFirst Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CrossFirst Bankshares 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 CrossFirst Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CrossFirst Bankshares has no effect on the direction of Banco Bradesco i.e., Banco Bradesco and CrossFirst Bankshares go up and down completely randomly.

Pair Corralation between Banco Bradesco and CrossFirst Bankshares

Given the investment horizon of 90 days Banco Bradesco SA is expected to generate 1.05 times more return on investment than CrossFirst Bankshares. However, Banco Bradesco is 1.05 times more volatile than CrossFirst Bankshares. It trades about 0.16 of its potential returns per unit of risk. CrossFirst Bankshares is currently generating about 0.07 per unit of risk. If you would invest  174.00  in Banco Bradesco SA on December 29, 2024 and sell it today you would earn a total of  35.00  from holding Banco Bradesco SA or generate 20.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	68.85%
Values	Daily Returns

Banco Bradesco SA  vs.  CrossFirst Bankshares

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 12 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting fundamental indicators, Banco Bradesco displayed solid returns over the last few months and may actually be approaching a breakup point.

CrossFirst Bankshares

Risk-Adjusted Performance

Modest

Over the last 90 days CrossFirst Bankshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat unsteady technical and fundamental indicators, CrossFirst Bankshares may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Banco Bradesco and CrossFirst Bankshares

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

The idea behind Banco Bradesco SA and CrossFirst Bankshares 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.