Correlation Between Banco Bradesco and BankFirst Capital

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

Diversification Opportunities for Banco Bradesco and BankFirst Capital

-0.83

Correlation Coefficient

Banco Bradesco  BankFirst Capital

Pay attention - limited upside

The 3 months correlation between Banco and BankFirst is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Banco Bradesco SA and BankFirst Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BankFirst Capital 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 BankFirst Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BankFirst Capital has no effect on the direction of Banco Bradesco i.e., Banco Bradesco and BankFirst Capital go up and down completely randomly.

Pair Corralation between Banco Bradesco and BankFirst Capital

Assuming the 90 days trading horizon Banco Bradesco SA is expected to under-perform the BankFirst Capital. In addition to that, Banco Bradesco is 1.01 times more volatile than BankFirst Capital. It trades about -0.03 of its total potential returns per unit of risk. BankFirst Capital is currently generating about 0.1 per unit of volatility. If you would invest  3,040  in BankFirst Capital on September 1, 2024 and sell it today you would earn a total of  1,160  from holding BankFirst Capital or generate 38.16% 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.  BankFirst Capital

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.

BankFirst Capital

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BankFirst Capital are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, BankFirst Capital exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Banco Bradesco and BankFirst Capital

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

The idea behind Banco Bradesco SA and BankFirst Capital 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.