Correlation Between Banco Bradesco and US Bancorp

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

Diversification Opportunities for Banco Bradesco and US Bancorp

0.03

Correlation Coefficient

Banco Bradesco  US Bancorp

Significant diversification

The 3 months correlation between Banco and USB is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Banco Bradesco SA and US Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Bancorp 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 US Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Bancorp has no effect on the direction of Banco Bradesco i.e., Banco Bradesco and US Bancorp go up and down completely randomly.

Pair Corralation between Banco Bradesco and US Bancorp

Assuming the 90 days trading horizon Banco Bradesco SA is expected to under-perform the US Bancorp. But the preferred stock apears to be less risky and, when comparing its historical volatility, Banco Bradesco SA is 1.06 times less risky than US Bancorp. The preferred stock trades about -0.01 of its potential returns per unit of risk. The US Bancorp is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  4,467  in US Bancorp on January 26, 2024 and sell it today you would lose (306.00) from holding US Bancorp or give up 6.85% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Banco Bradesco SA  vs.  US Bancorp

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.

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 somewhat strong basic indicators, US Bancorp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Banco Bradesco and US Bancorp

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

The idea behind Banco Bradesco SA and US Bancorp 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.