Correlation Between Banco Bradesco and Western Alliance

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

Diversification Opportunities for Banco Bradesco and Western Alliance

-0.67

Correlation Coefficient

Banco Bradesco  Western Alliance

Excellent diversification

The 3 months correlation between Banco and Western is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Banco Bradesco SA and Western Alliance Bancorp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Alliance Ban 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 Western Alliance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Alliance Ban has no effect on the direction of Banco Bradesco i.e., Banco Bradesco and Western Alliance go up and down completely randomly.

Pair Corralation between Banco Bradesco and Western Alliance

Considering the 90-day investment horizon Banco Bradesco SA is expected to under-perform the Western Alliance. In addition to that, Banco Bradesco is 1.39 times more volatile than Western Alliance Bancorporation. It trades about -0.3 of its total potential returns per unit of risk. Western Alliance Bancorporation is currently generating about -0.15 per unit of volatility. If you would invest  8,927  in Western Alliance Bancorporation on September 19, 2024 and sell it today you would lose (553.00) from holding Western Alliance Bancorporation or give up 6.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Banco Bradesco SA  vs.  Western Alliance Bancorp.

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 weak performance in the last few months, the Stock's fundamental drivers remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Western Alliance Ban

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Western Alliance Bancorporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Western Alliance is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Banco Bradesco and Western Alliance

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

The idea behind Banco Bradesco SA and Western Alliance Bancorporation 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 CEOs Directory module to screen CEOs from public companies around the world.