Correlation Between Banco Bradesco and National Bankshares

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

Diversification Opportunities for Banco Bradesco and National Bankshares

-0.79

Correlation Coefficient

Banco Bradesco  National Bankshares

Pay attention - limited upside

The 3 months correlation between Banco and National is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Banco Bradesco SA and National Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National 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 National Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bankshares has no effect on the direction of Banco Bradesco i.e., Banco Bradesco and National Bankshares go up and down completely randomly.

Pair Corralation between Banco Bradesco and National Bankshares

Given the investment horizon of 90 days Banco Bradesco SA is expected to under-perform the National Bankshares. In addition to that, Banco Bradesco is 1.08 times more volatile than National Bankshares. It trades about -0.01 of its total potential returns per unit of risk. National Bankshares is currently generating about 0.04 per unit of volatility. If you would invest  2,506  in National Bankshares on September 14, 2024 and sell it today you would earn a total of  696.00  from holding National Bankshares or generate 27.77% 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.  National Bankshares

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 January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

National Bankshares

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in National Bankshares are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, National Bankshares may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Banco Bradesco and National Bankshares

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

The idea behind Banco Bradesco SA and National 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.

Check out your portfolio center.

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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.