Correlation Between WEG SA and Banco Bradesco

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

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

Diversification Opportunities for WEG SA and Banco Bradesco

0.1

Correlation Coefficient

WEG SA  Banco Bradesco

Average diversification

The 3 months correlation between WEG and Banco is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding WEG SA 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 WEG SA 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 WEG SA 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 WEG SA i.e., WEG SA and Banco Bradesco go up and down completely randomly.

Pair Corralation between WEG SA and Banco Bradesco

Assuming the 90 days trading horizon WEG SA is expected to generate 1.09 times more return on investment than Banco Bradesco. However, WEG SA is 1.09 times more volatile than Banco Bradesco SA. It trades about 0.04 of its potential returns per unit of risk. Banco Bradesco SA is currently generating about 0.01 per unit of risk. If you would invest  3,872  in WEG SA on December 4, 2024 and sell it today you would earn a total of  970.00  from holding WEG SA or generate 25.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

WEG SA  vs.  Banco Bradesco SA

WEG SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days WEG SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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 comparatively stable basic indicators, Banco Bradesco is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with WEG SA and Banco Bradesco

The main advantage of trading using opposite WEG SA and Banco Bradesco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WEG SA 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 WEG SA 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.