Correlation Between Banco Bradesco and ELF Beauty

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

Diversification Opportunities for Banco Bradesco and ELF Beauty

-0.67

Correlation Coefficient

Banco Bradesco  ELF Beauty

Excellent diversification

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

Pair Corralation between Banco Bradesco and ELF Beauty

Given the investment horizon of 90 days Banco Bradesco SA is expected to under-perform the ELF Beauty. But the stock apears to be less risky and, when comparing its historical volatility, Banco Bradesco SA is 1.51 times less risky than ELF Beauty. The stock trades about -0.14 of its potential returns per unit of risk. The ELF Beauty is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  12,020  in ELF Beauty on October 9, 2024 and sell it today you would earn a total of  553.00  from holding ELF Beauty or generate 4.6% return on investment over 90 days.

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

Banco Bradesco SA  vs.  ELF Beauty

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 conflicting performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

ELF Beauty

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ELF Beauty are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, ELF Beauty reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Banco Bradesco and ELF Beauty

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

The idea behind Banco Bradesco SA and ELF Beauty 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.