Correlation Between Banco Bradesco and BBVA Banco

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

Diversification Opportunities for Banco Bradesco and BBVA Banco

-0.89

Correlation Coefficient

Banco Bradesco  BBVA Banco

Pay attention - limited upside

The 3 months correlation between Banco and BBVA is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Banco Bradesco SA and BBVA Banco Frances in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BBVA Banco Frances 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 BBVA Banco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BBVA Banco Frances has no effect on the direction of Banco Bradesco i.e., Banco Bradesco and BBVA Banco go up and down completely randomly.

Pair Corralation between Banco Bradesco and BBVA Banco

Considering the 90-day investment horizon Banco Bradesco SA is expected to under-perform the BBVA Banco. But the stock apears to be less risky and, when comparing its historical volatility, Banco Bradesco SA is 1.94 times less risky than BBVA Banco. The stock trades about -0.42 of its potential returns per unit of risk. The BBVA Banco Frances is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  1,371  in BBVA Banco Frances on September 5, 2024 and sell it today you would earn a total of  353.00  from holding BBVA Banco Frances or generate 25.75% return on investment over 90 days.

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

Banco Bradesco SA  vs.  BBVA Banco Frances

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 weak performance in the last few months, the Stock's fundamental drivers remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

BBVA Banco Frances

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BBVA Banco Frances are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, BBVA Banco reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Banco Bradesco and BBVA Banco

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

The idea behind Banco Bradesco SA and BBVA Banco Frances 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.