Correlation Between Verizon Communications and Banco Bradesco

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

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

Diversification Opportunities for Verizon Communications and Banco Bradesco

-0.04

Correlation Coefficient

Verizon Communications  Banco Bradesco

Good diversification

The 3 months correlation between Verizon and Banco is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications 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 Verizon Communications 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 Verizon Communications 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 Verizon Communications i.e., Verizon Communications and Banco Bradesco go up and down completely randomly.

Pair Corralation between Verizon Communications and Banco Bradesco

Assuming the 90 days trading horizon Verizon Communications is expected to generate 6.04 times less return on investment than Banco Bradesco. In addition to that, Verizon Communications is 1.07 times more volatile than Banco Bradesco SA. It trades about 0.02 of its total potential returns per unit of risk. Banco Bradesco SA is currently generating about 0.12 per unit of volatility. If you would invest  1,041  in Banco Bradesco SA on December 26, 2024 and sell it today you would earn a total of  118.00  from holding Banco Bradesco SA or generate 11.34% return on investment over 90 days.

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

Verizon Communications  vs.  Banco Bradesco SA

Verizon Communications

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Verizon Communications are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Verizon Communications is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 9 (%) 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 Verizon Communications and Banco Bradesco

The main advantage of trading using opposite Verizon Communications and Banco Bradesco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications 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 Verizon Communications 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.

Check out your portfolio center.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.