Correlation Between National Bankshares and Banco Bradesco

Can any of the company-specific risk be diversified away by investing in both National Bankshares and Banco Bradesco 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 National Bankshares and Banco Bradesco into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between National Bankshares and Banco Bradesco SA, you can compare the effects of market volatilities on National Bankshares and Banco Bradesco 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 National Bankshares with a short position of Banco Bradesco. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Bankshares and Banco Bradesco.

Diversification Opportunities for National Bankshares and Banco Bradesco

0.18

Correlation Coefficient

National Bankshares  Banco Bradesco

Average diversification

The 3 months correlation between National and Banco is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding National Bankshares and Banco Bradesco SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Bradesco SA and National Bankshares 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 National Bankshares are associated (or correlated) with Banco Bradesco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Bradesco SA has no effect on the direction of National Bankshares i.e., National Bankshares and Banco Bradesco go up and down completely randomly.

Pair Corralation between National Bankshares and Banco Bradesco

Given the investment horizon of 90 days National Bankshares is expected to generate 0.5 times more return on investment than Banco Bradesco. However, National Bankshares is 2.01 times less risky than Banco Bradesco. It trades about -0.09 of its potential returns per unit of risk. Banco Bradesco SA is currently generating about -0.12 per unit of risk. If you would invest  2,844  in National Bankshares on December 4, 2024 and sell it today you would lose (67.00) from holding National Bankshares or give up 2.36% of portfolio value over 90 days.

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

National Bankshares  vs.  Banco Bradesco SA

National Bankshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Bankshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Banco Bradesco SA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Bradesco SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Banco Bradesco is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with National Bankshares and Banco Bradesco

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

The idea behind National Bankshares and Banco Bradesco SA 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.