Correlation Between US Bancorp and BRADESCO

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

Diversification Opportunities for US Bancorp and BRADESCO

0.65
  Correlation Coefficient

Poor diversification

The 3 months correlation between US Bancorp and BRADESCO is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding US Bancorp 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 US Bancorp 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 US Bancorp 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 US Bancorp i.e., US Bancorp and BRADESCO go up and down completely randomly.

Pair Corralation between US Bancorp and BRADESCO

Considering the 90-day investment horizon US Bancorp is expected to under-perform the BRADESCO. In addition to that, US Bancorp is 1.15 times more volatile than BRADESCO PN EJ. It trades about -0.12 of its total potential returns per unit of risk. BRADESCO PN EJ is currently generating about -0.11 per unit of volatility. If you would invest  1,992  in BRADESCO PN EJ on March 31, 2022 and sell it today you would lose (201.00)  from holding BRADESCO PN EJ or give up 10.09% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

US Bancorp  vs.  BRADESCO PN EJ N1

 Performance (%) 
      Timeline 
US Bancorp 
US Bancorp Performance
0 of 100
Over the last 90 days US Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0397
Payout Ratio
0.4
Last Split Factor
3:1
Forward Annual Dividend Rate
1.84
Dividend Date
2022-07-15
Ex Dividend Date
2022-06-29
Last Split Date
1999-04-16

US Bancorp 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

US Bancorp and BRADESCO Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with US Bancorp and BRADESCO

The main advantage of trading using opposite US Bancorp and BRADESCO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Bancorp 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 idea behind US Bancorp 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

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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.
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 Piotroski F Score module to get Piotroski F Score based on binary analysis strategy of nine different fundamentals.

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