Correlation Between Banco Bradesco and Erste Group

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

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

Diversification Opportunities for Banco Bradesco and Erste Group

-0.84

Correlation Coefficient

Banco Bradesco  Erste Group

Pay attention - limited upside

The 3 months correlation between Banco and Erste is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Banco Bradesco SA and Erste Group Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Erste Group Bank and Banco Bradesco 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 Banco Bradesco SA are associated (or correlated) with Erste Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Erste Group Bank has no effect on the direction of Banco Bradesco i.e., Banco Bradesco and Erste Group go up and down completely randomly.

Pair Corralation between Banco Bradesco and Erste Group

Considering the 90-day investment horizon Banco Bradesco SA is expected to under-perform the Erste Group. In addition to that, Banco Bradesco is 1.4 times more volatile than Erste Group Bank. It trades about -0.04 of its total potential returns per unit of risk. Erste Group Bank is currently generating about 0.14 per unit of volatility. If you would invest  2,379  in Erste Group Bank on September 25, 2024 and sell it today you would earn a total of  698.00  from holding Erste Group Bank or generate 29.34% return on investment over 90 days.

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

Banco Bradesco SA  vs.  Erste Group Bank

Banco Bradesco SA

Risk-Adjusted Performance

0 of 100

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 weak performance in the last few months, the Stock's fundamental drivers remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Erste Group Bank

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Erste Group Bank are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Erste Group showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Banco Bradesco and Erste Group

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

The idea behind Banco Bradesco SA and Erste Group Bank 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.