Correlation Between Prosperity Bancshares and Banco Bradesco

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Can any of the company-specific risk be diversified away by investing in both Prosperity Bancshares 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 Prosperity Bancshares and Banco Bradesco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prosperity Bancshares and Banco Bradesco SA, you can compare the effects of market volatilities on Prosperity Bancshares 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 Prosperity Bancshares with a short position of Banco Bradesco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prosperity Bancshares and Banco Bradesco.

Diversification Opportunities for Prosperity Bancshares and Banco Bradesco

ProsperityBancoDiversified AwayProsperityBancoDiversified Away100%
-0.81
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Prosperity and Banco is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Prosperity Bancshares 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 Prosperity Bancshares 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 Prosperity Bancshares 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 Prosperity Bancshares i.e., Prosperity Bancshares and Banco Bradesco go up and down completely randomly.

Pair Corralation between Prosperity Bancshares and Banco Bradesco

Allowing for the 90-day total investment horizon Prosperity Bancshares is expected to generate 0.8 times more return on investment than Banco Bradesco. However, Prosperity Bancshares is 1.25 times less risky than Banco Bradesco. It trades about 0.09 of its potential returns per unit of risk. Banco Bradesco SA is currently generating about -0.22 per unit of risk. If you would invest  7,208  in Prosperity Bancshares on September 20, 2024 and sell it today you would earn a total of  634.00  from holding Prosperity Bancshares or generate 8.8% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Prosperity Bancshares  vs.  Banco Bradesco SA

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -20-10010
JavaScript chart by amCharts 3.21.15PB BBDO
       Timeline  
Prosperity Bancshares 

Risk-Adjusted Performance

6 of 100

 
Weak
 
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Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Prosperity Bancshares are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile fundamental drivers, Prosperity Bancshares may actually be approaching a critical reversion point that can send shares even higher in January 2025.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec70758085
Banco Bradesco SA 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 conflicting performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec1.71.81.922.12.22.32.42.5

Prosperity Bancshares and Banco Bradesco Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-5.37-4.02-2.68-1.33-0.02251.332.734.135.536.93 0.020.040.060.080.100.120.14
JavaScript chart by amCharts 3.21.15PB BBDO
       Returns  

Pair Trading with Prosperity Bancshares and Banco Bradesco

The main advantage of trading using opposite Prosperity Bancshares and Banco Bradesco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prosperity Bancshares 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 Prosperity Bancshares 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.

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