Correlation Between Banco Bradesco and Verizon Communications

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

Diversification Opportunities for Banco Bradesco and Verizon Communications

0.5

Correlation Coefficient

Banco Bradesco  Verizon Communications

Very weak diversification

The 3 months correlation between Banco and Verizon is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Banco Bradesco SA and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications 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 Verizon Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verizon Communications has no effect on the direction of Banco Bradesco i.e., Banco Bradesco and Verizon Communications go up and down completely randomly.

Pair Corralation between Banco Bradesco and Verizon Communications

Given the investment horizon of 90 days Banco Bradesco is expected to generate 1.85 times less return on investment than Verizon Communications. In addition to that, Banco Bradesco is 1.97 times more volatile than Verizon Communications. It trades about 0.01 of its total potential returns per unit of risk. Verizon Communications is currently generating about 0.02 per unit of volatility. If you would invest  3,632  in Verizon Communications on October 23, 2024 and sell it today you would earn a total of  297.50  from holding Verizon Communications or generate 8.19% return on investment over 90 days.

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

Banco Bradesco SA  vs.  Verizon Communications

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.

Verizon Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Verizon Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Banco Bradesco and Verizon Communications

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

The idea behind Banco Bradesco SA and Verizon Communications 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.