Correlation Between BRADESCO and Postal Svgs

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

Diversification Opportunities for BRADESCO and Postal Svgs

0.08
  Correlation Coefficient

Significant diversification

The 3 months correlation between BRADESCO and Postal is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding BRADESCO PN EJ N1 and Postal Svgs Bk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Postal Svgs Bk and 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 BRADESCO PN EJ are associated (or correlated) with Postal Svgs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Postal Svgs Bk has no effect on the direction of BRADESCO i.e., BRADESCO and Postal Svgs go up and down completely randomly.

Pair Corralation between BRADESCO and Postal Svgs

Assuming the 90 days trading horizon BRADESCO PN EJ is expected to under-perform the Postal Svgs. But the stock apears to be less risky and, when comparing its historical volatility, BRADESCO PN EJ is 1.61 times less risky than Postal Svgs. The stock trades about -0.42 of its potential returns per unit of risk. The Postal Svgs Bk is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,501  in Postal Svgs Bk on March 29, 2022 and sell it today you would earn a total of  7.00  from holding Postal Svgs Bk or generate 0.47% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy95.0%
ValuesDaily Returns

BRADESCO PN EJ N1  vs.  Postal Svgs Bk

 Performance (%) 
      Timeline 
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

Postal Svgs Bk 
Postal Performance
0 of 100
Over the last 90 days Postal Svgs Bk has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Postal Svgs is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0525
Payout Ratio
0.75
Forward Annual Dividend Rate
0.77
Dividend Date
2022-08-24
Ex Dividend Date
2022-06-30

Postal Price Channel

BRADESCO and Postal Svgs Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with BRADESCO and Postal Svgs

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

BRADESCO PN EJ

Pair trading matchups for BRADESCO

Teucrium Corn vs. BRADESCO
Verizon Communications vs. BRADESCO
Chevron Corp vs. BRADESCO
Cincinnati Financial vs. BRADESCO
Merck vs. BRADESCO
Conagra Brands vs. BRADESCO
Home Depot vs. BRADESCO
Northrop Grumman vs. BRADESCO
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against BRADESCO as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. BRADESCO's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, BRADESCO's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to BRADESCO PN EJ.
The idea behind BRADESCO PN EJ and Postal Svgs Bk 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.

Postal Svgs Bk

Pair trading matchups for Postal Svgs

Teucrium Corn vs. Postal Svgs
Verizon Communications vs. Postal Svgs
Cincinnati Financial vs. Postal Svgs
Conagra Brands vs. Postal Svgs
Chevron Corp vs. Postal Svgs
Home Depot vs. Postal Svgs
Merck vs. Postal Svgs
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Postal Svgs as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Postal Svgs' systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Postal Svgs' unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Postal Svgs Bk.
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.

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