Correlation Between Banco Bradesco and Bancolombia
Can any of the company-specific risk be diversified away by investing in both Banco Bradesco and Bancolombia 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 Bancolombia 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 Bancolombia SA ADR, you can compare the effects of market volatilities on Banco Bradesco and Bancolombia 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 Bancolombia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Bradesco and Bancolombia.
Diversification Opportunities for Banco Bradesco and Bancolombia
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Banco and Bancolombia is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Banco Bradesco SA and Bancolombia SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bancolombia SA ADR 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 Bancolombia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bancolombia SA ADR has no effect on the direction of Banco Bradesco i.e., Banco Bradesco and Bancolombia go up and down completely randomly.
Pair Corralation between Banco Bradesco and Bancolombia
Considering the 90-day investment horizon Banco Bradesco SA is expected to under-perform the Bancolombia. But the stock apears to be less risky and, when comparing its historical volatility, Banco Bradesco SA is 1.11 times less risky than Bancolombia. The stock trades about -0.19 of its potential returns per unit of risk. The Bancolombia SA ADR is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest 3,365 in Bancolombia SA ADR on January 21, 2024 and sell it today you would lose (100.00) from holding Bancolombia SA ADR or give up 2.97% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Banco Bradesco SA vs. Bancolombia SA ADR
Performance |
| Timeline |
| Banco Bradesco SA |
| Bancolombia SA ADR |
Banco Bradesco and Bancolombia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Banco Bradesco and Bancolombia
The main advantage of trading using opposite Banco Bradesco and Bancolombia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco Bradesco position performs unexpectedly, Bancolombia 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 Bancolombia will offset losses from the drop in Bancolombia's long position.| Banco Bradesco vs. CrossFirst Bankshares | Banco Bradesco vs. Banco Bradesco SA | Banco Bradesco vs. CF Bankshares | Banco Bradesco vs. Foreign Trade Bank |
| Bancolombia vs. CrossFirst Bankshares | Bancolombia vs. Banco Bradesco SA | Bancolombia vs. CF Bankshares | Bancolombia vs. Foreign Trade Bank |
Check out your portfolio center.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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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