Correlation Between BRASIL ON and BRADESCO

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Can any of the company-specific risk be diversified away by investing in both BRASIL ON and 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 BRASIL ON and BRADESCO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BRASIL ON NM and BRADESCO PN EJ, you can compare the effects of market volatilities on BRASIL ON and 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 BRASIL ON with a short position of BRADESCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRASIL ON and BRADESCO.

Diversification Opportunities for BRASIL ON and BRADESCO

0.76
  Correlation Coefficient

Poor diversification

The 3 months correlation between BRASIL and BRADESCO is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding BRASIL ON NM and BRADESCO PN EJ N1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRADESCO PN EJ and BRASIL ON 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 BRASIL ON NM are associated (or correlated) with BRADESCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRADESCO PN EJ has no effect on the direction of BRASIL ON i.e., BRASIL ON and BRADESCO go up and down completely randomly.

Pair Corralation between BRASIL ON and BRADESCO

Assuming the 90 days trading horizon BRASIL ON NM is expected to under-perform the BRADESCO. In addition to that, BRASIL ON is 1.12 times more volatile than BRADESCO PN EJ. It trades about -0.47 of its total potential returns per unit of risk. BRADESCO PN EJ is currently generating about -0.44 per unit of volatility. If you would invest  2,006  in BRADESCO PN EJ on March 27, 2022 and sell it today you would lose (214.00)  from holding BRADESCO PN EJ or give up 10.67% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

BRASIL ON NM  vs.  BRADESCO PN EJ N1

 Performance (%) 
      Timeline 
BRASIL ON NM 
BRASIL Performance
0 of 100
Over the last 90 days BRASIL ON NM has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, BRASIL ON is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

BRASIL Price Channel

BRADESCO PN EJ 
BRADESCO Performance
0 of 100
Over the last 90 days BRADESCO PN EJ has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

BRADESCO Price Channel

BRASIL ON and BRADESCO Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with BRASIL ON and BRADESCO

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

BRASIL ON NM

Pair trading matchups for BRASIL ON

The idea behind BRASIL ON NM and BRADESCO PN EJ 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.

BRADESCO PN EJ

Pair trading matchups for BRADESCO

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 Probability Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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