Correlation Between PacWest Bancorp and Banco Bradesco

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

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

Diversification Opportunities for PacWest Bancorp and Banco Bradesco

-0.04

Correlation Coefficient

PacWest Bancorp  Banco Bradesco

Good diversification

The 3 months correlation between PacWest and Banco is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding PacWest Bancorp 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 PacWest Bancorp 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 PacWest Bancorp 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 PacWest Bancorp i.e., PacWest Bancorp and Banco Bradesco go up and down completely randomly.

Pair Corralation between PacWest Bancorp and Banco Bradesco

Given the investment horizon of 90 days PacWest Bancorp is expected to under-perform the Banco Bradesco. In addition to that, PacWest Bancorp is 1.43 times more volatile than Banco Bradesco SA. It trades about -0.12 of its total potential returns per unit of risk. Banco Bradesco SA is currently generating about -0.01 per unit of volatility. If you would invest  289.00  in Banco Bradesco SA on February 1, 2024 and sell it today you would lose (19.00) from holding Banco Bradesco SA or give up 6.57% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	16.39%
Values	Daily Returns

PacWest Bancorp  vs.  Banco Bradesco SA

PacWest Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PacWest Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, PacWest Bancorp is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated 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 latest fragile performance, the Stock's fundamental drivers remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with PacWest Bancorp and Banco Bradesco

The main advantage of trading using opposite PacWest Bancorp and Banco Bradesco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PacWest Bancorp 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 PacWest Bancorp 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.