Correlation Between United States and Banco Bradesco

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

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

Diversification Opportunities for United States and Banco Bradesco

0.88

Correlation Coefficient

United States  Banco Bradesco

Very poor diversification

The 3 months correlation between United and Banco is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and Banco Bradesco DRC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Bradesco DRC and United States 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 United States Steel 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 DRC has no effect on the direction of United States i.e., United States and Banco Bradesco go up and down completely randomly.

Pair Corralation between United States and Banco Bradesco

Given the investment horizon of 90 days United States Steel is expected to generate 1.14 times more return on investment than Banco Bradesco. However, United States is 1.14 times more volatile than Banco Bradesco DRC. It trades about 0.25 of its potential returns per unit of risk. Banco Bradesco DRC is currently generating about 0.18 per unit of risk. If you would invest  1,237,500  in United States Steel on December 26, 2024 and sell it today you would earn a total of  625,000  from holding United States Steel or generate 50.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.33%
Values	Daily Returns

United States Steel  vs.  Banco Bradesco DRC

United States Steel

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in United States Steel are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, United States sustained solid returns over the last few months and may actually be approaching a breakup point.

Banco Bradesco DRC

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Bradesco DRC are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Banco Bradesco sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United States and Banco Bradesco

The main advantage of trading using opposite United States and Banco Bradesco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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 United States Steel and Banco Bradesco DRC 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.