Correlation Between Banco Bradesco and Fleury SA

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

Diversification Opportunities for Banco Bradesco and Fleury SA

0.86

Correlation Coefficient

Banco Bradesco  Fleury SA

Very poor diversification

The 3 months correlation between Banco and Fleury is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Banco Bradesco SA and Fleury SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fleury SA 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 Fleury SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fleury SA has no effect on the direction of Banco Bradesco i.e., Banco Bradesco and Fleury SA go up and down completely randomly.

Pair Corralation between Banco Bradesco and Fleury SA

Assuming the 90 days trading horizon Banco Bradesco SA is expected to generate 1.0 times more return on investment than Fleury SA. However, Banco Bradesco SA is 1.0 times less risky than Fleury SA. It trades about 0.01 of its potential returns per unit of risk. Fleury SA is currently generating about 0.0 per unit of risk. If you would invest  1,097  in Banco Bradesco SA on September 15, 2024 and sell it today you would earn a total of  9.00  from holding Banco Bradesco SA or generate 0.82% return on investment over 90 days.

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

Banco Bradesco SA  vs.  Fleury SA

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 basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Fleury SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fleury 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 Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Banco Bradesco and Fleury SA

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

The idea behind Banco Bradesco SA and Fleury 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.