Correlation Between Bread Financial and Financeira Alfa

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

By analyzing existing cross correlation between Bread Financial Holdings and Financeira Alfa SA, you can compare the effects of market volatilities on Bread Financial and Financeira Alfa 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 Bread Financial with a short position of Financeira Alfa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bread Financial and Financeira Alfa.

Diversification Opportunities for Bread Financial and Financeira Alfa

0.0

Correlation Coefficient

Bread Financial  Financeira Alfa

Pay attention - limited upside

The 3 months correlation between Bread and Financeira is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Bread Financial Holdings and Financeira Alfa SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financeira Alfa SA and Bread Financial 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 Bread Financial Holdings are associated (or correlated) with Financeira Alfa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financeira Alfa SA has no effect on the direction of Bread Financial i.e., Bread Financial and Financeira Alfa go up and down completely randomly.

Pair Corralation between Bread Financial and Financeira Alfa

If you would invest  8,192  in Bread Financial Holdings on September 17, 2024 and sell it today you would earn a total of  1,690  from holding Bread Financial Holdings or generate 20.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Bread Financial Holdings  vs.  Financeira Alfa SA

Bread Financial Holdings

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bread Financial Holdings are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Bread Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Financeira Alfa SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Financeira Alfa SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Financeira Alfa is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Bread Financial and Financeira Alfa

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

The idea behind Bread Financial Holdings and Financeira Alfa 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.