Correlation Between Companhia Energtica and Banco Bradesco

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

Diversification Opportunities for Companhia Energtica and Banco Bradesco

0.01
  Correlation Coefficient

Significant diversification

The 3 months correlation between Companhia and Banco is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Energtica De 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 Companhia Energtica 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 Companhia Energtica De 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 Companhia Energtica i.e., Companhia Energtica and Banco Bradesco go up and down completely randomly.

Pair Corralation between Companhia Energtica and Banco Bradesco

Assuming the 90 days trading horizon Companhia Energtica De is expected to generate 1.23 times more return on investment than Banco Bradesco. However, Companhia Energtica is 1.23 times more volatile than Banco Bradesco SA. It trades about 0.07 of its potential returns per unit of risk. Banco Bradesco SA is currently generating about -0.02 per unit of risk. If you would invest  1,252  in Companhia Energtica De on September 5, 2022 and sell it today you would earn a total of  538.00  from holding Companhia Energtica De or generate 42.97% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Companhia Energtica De  vs.  Banco Bradesco SA

 Performance (%) 
       Timeline  
Companhia Energtica 
Companhia Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Companhia Energtica De are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Companhia Energtica is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Companhia Price Channel

Banco Bradesco SA 
Banco Performance
0 of 100
Over the last 90 days Banco Bradesco SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2023. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Banco Price Channel

Companhia Energtica and Banco Bradesco Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Companhia Energtica and Banco Bradesco

The main advantage of trading using opposite Companhia Energtica and Banco Bradesco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Companhia Energtica 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.
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The idea behind Companhia Energtica De 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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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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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