Correlation Between Banco Bradesco and Nmb Financial

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

Diversification Opportunities for Banco Bradesco and Nmb Financial

-0.75

Correlation Coefficient

Banco Bradesco  Nmb Financial

Pay attention - limited upside

The 3 months correlation between Banco and Nmb is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Banco Bradesco SA and Nmb Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nmb Financial Corp 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 Nmb Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nmb Financial Corp has no effect on the direction of Banco Bradesco i.e., Banco Bradesco and Nmb Financial go up and down completely randomly.

Pair Corralation between Banco Bradesco and Nmb Financial

Assuming the 90 days trading horizon Banco Bradesco is expected to generate 32.34 times less return on investment than Nmb Financial. But when comparing it to its historical volatility, Banco Bradesco SA is 1.11 times less risky than Nmb Financial. It trades about 0.01 of its potential returns per unit of risk. Nmb Financial Corp is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  850.00  in Nmb Financial Corp on September 5, 2024 and sell it today you would earn a total of  550.00  from holding Nmb Financial Corp or generate 64.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.43%
Values	Daily Returns

Banco Bradesco SA  vs.  Nmb Financial Corp

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 uncertain performance in the last few months, the Preferred Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Nmb Financial Corp

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Nmb Financial Corp are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental drivers, Nmb Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Banco Bradesco and Nmb Financial

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

The idea behind Banco Bradesco SA and Nmb Financial Corp 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 Stocks Directory module to find actively traded stocks across global markets.