Correlation Between US Bancorp and Banco Bradesco

Can any of the company-specific risk be diversified away by investing in both US Bancorp 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 US Bancorp and Banco 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 Banco Bradesco SA, you can compare the effects of market volatilities on US Bancorp 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 US Bancorp with a short position of Banco Bradesco. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Bancorp and Banco Bradesco.

Diversification Opportunities for US Bancorp and Banco Bradesco

0.16

Correlation Coefficient

US Bancorp  Banco Bradesco

Average diversification

The 3 months correlation between USB-PH and Banco is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding US Bancorp 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 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 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 US Bancorp i.e., US Bancorp and Banco Bradesco go up and down completely randomly.

Pair Corralation between US Bancorp and Banco Bradesco

Assuming the 90 days trading horizon US Bancorp is expected to under-perform the Banco Bradesco. But the preferred stock apears to be less risky and, when comparing its historical volatility, US Bancorp is 1.62 times less risky than Banco Bradesco. The preferred stock trades about -0.03 of its potential returns per unit of risk. The Banco Bradesco SA is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,338  in Banco Bradesco SA on February 15, 2024 and sell it today you would earn a total of  4.00  from holding Banco Bradesco SA or generate 0.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

US Bancorp  vs.  Banco Bradesco SA

US Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days US Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental drivers, US Bancorp is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Banco Bradesco SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banco Bradesco SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Banco Bradesco is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with US Bancorp and Banco Bradesco

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

The idea behind US Bancorp 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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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 the Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.