Correlation Between Nasdaq QQQ and BRADESCO

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

Diversification Opportunities for Nasdaq QQQ and BRADESCO

0.12
  Correlation Coefficient

Average diversification

The 3 months correlation between Nasdaq and BRADESCO is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq QQQ Invesco 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 Nasdaq QQQ 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 Nasdaq QQQ Invesco 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 Nasdaq QQQ i.e., Nasdaq QQQ and BRADESCO go up and down completely randomly.

Pair Corralation between Nasdaq QQQ and BRADESCO

Considering the 90-day investment horizon Nasdaq QQQ Invesco is expected to under-perform the BRADESCO. But the etf apears to be less risky and, when comparing its historical volatility, Nasdaq QQQ Invesco is 1.04 times less risky than BRADESCO. The etf trades about -0.05 of its potential returns per unit of risk. The BRADESCO PN EJ is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,112  in BRADESCO PN EJ on July 2, 2022 and sell it today you would lose (128.00)  from holding BRADESCO PN EJ or give up 6.06% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy99.31%
ValuesDaily Returns

Nasdaq QQQ Invesco  vs.  BRADESCO PN EJ N1

 Performance (%) 
       Timeline  
Nasdaq QQQ Invesco 
Nasdaq Performance
0 of 100
Over the last 90 days Nasdaq QQQ Invesco has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Nasdaq QQQ is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the insiders.

Nasdaq Price Channel

BRADESCO PN EJ 
BRADESCO Performance
13 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in BRADESCO PN EJ are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, BRADESCO reported solid returns over the last few months and may actually be approaching a breakup point.

BRADESCO Price Channel

Nasdaq QQQ and BRADESCO Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Nasdaq QQQ and BRADESCO

The main advantage of trading using opposite Nasdaq QQQ and BRADESCO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq QQQ 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.
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 Nasdaq QQQ 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. Nasdaq QQQ'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, Nasdaq QQQ'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 Nasdaq QQQ Invesco.
The idea behind Nasdaq QQQ Invesco 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.
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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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