Correlation Between Banco Bradesco and 3M

Can any of the company-specific risk be diversified away by investing in both Banco Bradesco and 3M 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 3M 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 3M Company, you can compare the effects of market volatilities on Banco Bradesco and 3M 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 3M. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Bradesco and 3M.

Diversification Opportunities for Banco Bradesco and 3M

0.34

Correlation Coefficient

Banco Bradesco  3M

Weak diversification

The 3 months correlation between Banco and 3M is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Banco Bradesco SA and 3M Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 3M Company 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 3M. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 3M Company has no effect on the direction of Banco Bradesco i.e., Banco Bradesco and 3M go up and down completely randomly.

Pair Corralation between Banco Bradesco and 3M

Given the investment horizon of 90 days Banco Bradesco SA is expected to under-perform the 3M. In addition to that, Banco Bradesco is 2.99 times more volatile than 3M Company. It trades about -0.06 of its total potential returns per unit of risk. 3M Company is currently generating about -0.05 per unit of volatility. If you would invest  13,149  in 3M Company on October 9, 2024 and sell it today you would lose (120.00) from holding 3M Company or give up 0.91% of portfolio value over 90 days.

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

Banco Bradesco SA  vs.  3M Company

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.

3M Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 3M Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, 3M is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Banco Bradesco and 3M

The main advantage of trading using opposite Banco Bradesco and 3M positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco Bradesco position performs unexpectedly, 3M 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 3M will offset losses from the drop in 3M's long position.

The idea behind Banco Bradesco SA and 3M Company 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.