Correlation Between Enterprise Financial and Banco Bradesco

Can any of the company-specific risk be diversified away by investing in both Enterprise Financial and Banco Bradesco 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 Enterprise Financial and Banco Bradesco into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Enterprise Financial Services and Banco Bradesco SA, you can compare the effects of market volatilities on Enterprise Financial and Banco Bradesco 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 Enterprise Financial with a short position of Banco Bradesco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enterprise Financial and Banco Bradesco.

Diversification Opportunities for Enterprise Financial and Banco Bradesco

0.64

Correlation Coefficient

Enterprise Financial  Banco Bradesco

Poor diversification

The 3 months correlation between Enterprise and Banco is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Enterprise Financial Services and Banco Bradesco SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Bradesco SA and Enterprise Financial 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 Enterprise Financial Services are associated (or correlated) with Banco Bradesco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Bradesco SA has no effect on the direction of Enterprise Financial i.e., Enterprise Financial and Banco Bradesco go up and down completely randomly.

Pair Corralation between Enterprise Financial and Banco Bradesco

Given the investment horizon of 90 days Enterprise Financial is expected to generate 1.42 times less return on investment than Banco Bradesco. But when comparing it to its historical volatility, Enterprise Financial Services is 1.38 times less risky than Banco Bradesco. It trades about 0.16 of its potential returns per unit of risk. Banco Bradesco SA is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  186.00  in Banco Bradesco SA on November 19, 2024 and sell it today you would earn a total of  15.00  from holding Banco Bradesco SA or generate 8.06% return on investment over 90 days.

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

Enterprise Financial Services  vs.  Banco Bradesco SA

Enterprise Financial

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Enterprise Financial Services are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Enterprise Financial is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Banco Bradesco SA

Risk-Adjusted Performance

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 very healthy fundamental indicators, Banco Bradesco is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Enterprise Financial and Banco Bradesco

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

The idea behind Enterprise Financial Services and Banco Bradesco 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.