Correlation Between Banco Bradesco and Exxon

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

Diversification Opportunities for Banco Bradesco and Exxon

0.85

Correlation Coefficient

Banco Bradesco  Exxon

Very poor diversification

The 3 months correlation between Banco and Exxon is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Banco Bradesco SA and Exxon Mobil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exxon Mobil Corp 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 Exxon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exxon Mobil Corp has no effect on the direction of Banco Bradesco i.e., Banco Bradesco and Exxon go up and down completely randomly.

Pair Corralation between Banco Bradesco and Exxon

Given the investment horizon of 90 days Banco Bradesco SA is expected to generate 3.32 times more return on investment than Exxon. However, Banco Bradesco is 3.32 times more volatile than Exxon Mobil Corp. It trades about -0.06 of its potential returns per unit of risk. Exxon Mobil Corp is currently generating about -0.3 per unit of risk. If you would invest  188.00  in Banco Bradesco SA on October 8, 2024 and sell it today you would lose (7.00) from holding Banco Bradesco SA or give up 3.72% of portfolio value over 90 days.

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

Banco Bradesco SA  vs.  Exxon Mobil Corp

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.

Exxon Mobil Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Exxon Mobil Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Banco Bradesco and Exxon

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

The idea behind Banco Bradesco SA and Exxon Mobil Corp 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.