Correlation Between Itasa Investimentos and Banco Bradesco

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

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

Diversification Opportunities for Itasa Investimentos and Banco Bradesco

0.89

Correlation Coefficient

Itasa Investimentos  Banco Bradesco

Very poor diversification

The 3 months correlation between Itasa and Banco is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Itasa Investimentos 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 Itasa Investimentos 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 Itasa Investimentos 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 Itasa Investimentos i.e., Itasa Investimentos and Banco Bradesco go up and down completely randomly.

Pair Corralation between Itasa Investimentos and Banco Bradesco

Assuming the 90 days trading horizon Itasa Investimentos is expected to generate 0.97 times more return on investment than Banco Bradesco. However, Itasa Investimentos is 1.03 times less risky than Banco Bradesco. It trades about 0.11 of its potential returns per unit of risk. Banco Bradesco SA is currently generating about 0.1 per unit of risk. If you would invest  869.00  in Itasa Investimentos on December 30, 2024 and sell it today you would earn a total of  93.00  from holding Itasa Investimentos or generate 10.7% return on investment over 90 days.

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

Itasa Investimentos  vs.  Banco Bradesco SA

Itasa Investimentos

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Itasa Investimentos are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Itasa Investimentos may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Banco Bradesco SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Bradesco SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Banco Bradesco may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Itasa Investimentos and Banco Bradesco

The main advantage of trading using opposite Itasa Investimentos and Banco Bradesco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Itasa Investimentos 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 Itasa Investimentos 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.