Correlation Between Banco Bradesco and Southern California

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

Diversification Opportunities for Banco Bradesco and Southern California

-0.88

Correlation Coefficient

Banco Bradesco  Southern California

Pay attention - limited upside

The 3 months correlation between Banco and Southern is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Banco Bradesco SA and Southern California Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern California 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 Southern California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern California has no effect on the direction of Banco Bradesco i.e., Banco Bradesco and Southern California go up and down completely randomly.

Pair Corralation between Banco Bradesco and Southern California

Considering the 90-day investment horizon Banco Bradesco SA is expected to under-perform the Southern California. In addition to that, Banco Bradesco is 1.47 times more volatile than Southern California Bancorp. It trades about -0.07 of its total potential returns per unit of risk. Southern California Bancorp is currently generating about 0.02 per unit of volatility. If you would invest  1,689  in Southern California Bancorp on September 13, 2024 and sell it today you would earn a total of  103.00  from holding Southern California Bancorp or generate 6.1% 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.  Southern California 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 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.

Southern California

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Southern California Bancorp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, Southern California disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Banco Bradesco and Southern California

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

The idea behind Banco Bradesco SA and Southern California 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.