Correlation Between Banco Bradesco and WTB Financial

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

Diversification Opportunities for Banco Bradesco and WTB Financial

-0.9

Correlation Coefficient

Banco Bradesco  WTB Financial

Pay attention - limited upside

The 3 months correlation between Banco and WTB is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Banco Bradesco SA and WTB Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WTB Financial 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 WTB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WTB Financial has no effect on the direction of Banco Bradesco i.e., Banco Bradesco and WTB Financial go up and down completely randomly.

Pair Corralation between Banco Bradesco and WTB Financial

Assuming the 90 days trading horizon Banco Bradesco SA is expected to under-perform the WTB Financial. In addition to that, Banco Bradesco is 2.05 times more volatile than WTB Financial. It trades about -0.22 of its total potential returns per unit of risk. WTB Financial is currently generating about 0.16 per unit of volatility. If you would invest  28,624  in WTB Financial on September 12, 2024 and sell it today you would earn a total of  2,076  from holding WTB Financial or generate 7.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Banco Bradesco SA  vs.  WTB Financial

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 January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

WTB Financial

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WTB Financial are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady technical and fundamental indicators, WTB Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Banco Bradesco and WTB Financial

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

The idea behind Banco Bradesco SA and WTB Financial 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.