Correlation Between Banco Bradesco and Postal Savings

Can any of the company-specific risk be diversified away by investing in both Banco Bradesco and Postal Savings 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 Banco Bradesco and Postal Savings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Banco Bradesco SA and Postal Savings Bank, you can compare the effects of market volatilities on Banco Bradesco and Postal Savings 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 Banco Bradesco with a short position of Postal Savings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Bradesco and Postal Savings.

Diversification Opportunities for Banco Bradesco and Postal Savings

-0.61

Correlation Coefficient

Banco Bradesco  Postal Savings

Excellent diversification

The 3 months correlation between Banco and Postal is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Banco Bradesco SA and Postal Savings Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Postal Savings Bank and Banco 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 Banco Bradesco SA are associated (or correlated) with Postal Savings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Postal Savings Bank has no effect on the direction of Banco Bradesco i.e., Banco Bradesco and Postal Savings go up and down completely randomly.

Pair Corralation between Banco Bradesco and Postal Savings

Assuming the 90 days trading horizon Banco Bradesco SA is expected to generate 0.49 times more return on investment than Postal Savings. However, Banco Bradesco SA is 2.04 times less risky than Postal Savings. It trades about -0.15 of its potential returns per unit of risk. Postal Savings Bank is currently generating about -0.08 per unit of risk. If you would invest  1,412  in Banco Bradesco SA on January 26, 2024 and sell it today you would lose (45.00) from holding Banco Bradesco SA or give up 3.19% of portfolio value over 90 days.

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

Banco Bradesco SA  vs.  Postal Savings Bank

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 latest uncertain performance, the Preferred Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Postal Savings Bank

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Postal Savings Bank are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Postal Savings may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Banco Bradesco and Postal Savings

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

The idea behind Banco Bradesco SA and Postal Savings Bank 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.