Correlation Between Xp and Banco Bradesco

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

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

Diversification Opportunities for Xp and Banco Bradesco

0.68

Correlation Coefficient

Xp  Banco Bradesco

Poor diversification

The 3 months correlation between Xp and Banco is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Xp Inc and Banco Bradesco SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Bradesco SA and Xp 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 Xp Inc 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 SA has no effect on the direction of Xp i.e., Xp and Banco Bradesco go up and down completely randomly.

Pair Corralation between Xp and Banco Bradesco

Assuming the 90 days trading horizon Xp Inc is expected to generate 1.5 times more return on investment than Banco Bradesco. However, Xp is 1.5 times more volatile than Banco Bradesco SA. It trades about 0.02 of its potential returns per unit of risk. Banco Bradesco SA is currently generating about 0.0 per unit of risk. If you would invest  7,925  in Xp Inc on August 31, 2024 and sell it today you would earn a total of  430.00  from holding Xp Inc or generate 5.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.58%
Values	Daily Returns

Xp Inc  vs.  Banco Bradesco SA

Xp Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xp Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

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 December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Xp and Banco Bradesco

The main advantage of trading using opposite Xp and Banco Bradesco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xp 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 Xp Inc and Banco Bradesco SA 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.