Correlation Between Ledesma SAAI and Banco Bradesco

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

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

Diversification Opportunities for Ledesma SAAI and Banco Bradesco

0.38

Correlation Coefficient

Ledesma SAAI  Banco Bradesco

Weak diversification

The 3 months correlation between Ledesma and Banco is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Ledesma SAAI and Banco Bradesco DRC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Bradesco DRC and Ledesma SAAI 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 Ledesma SAAI 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 DRC has no effect on the direction of Ledesma SAAI i.e., Ledesma SAAI and Banco Bradesco go up and down completely randomly.

Pair Corralation between Ledesma SAAI and Banco Bradesco

Assuming the 90 days trading horizon Ledesma SAAI is expected to generate 1.1 times more return on investment than Banco Bradesco. However, Ledesma SAAI is 1.1 times more volatile than Banco Bradesco DRC. It trades about 0.25 of its potential returns per unit of risk. Banco Bradesco DRC is currently generating about 0.02 per unit of risk. If you would invest  106,550  in Ledesma SAAI on March 21, 2024 and sell it today you would earn a total of  9,700  from holding Ledesma SAAI or generate 9.1% return on investment over 90 days.

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

Ledesma SAAI  vs.  Banco Bradesco DRC

Ledesma SAAI

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ledesma SAAI are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ledesma SAAI sustained solid returns over the last few months and may actually be approaching a breakup point.

Banco Bradesco DRC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banco Bradesco DRC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Banco Bradesco is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ledesma SAAI and Banco Bradesco

The main advantage of trading using opposite Ledesma SAAI and Banco Bradesco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ledesma SAAI 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 Ledesma SAAI and Banco Bradesco DRC 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.