Correlation Between Banco Bradesco and Grupo Aval

Can any of the company-specific risk be diversified away by investing in both Banco Bradesco and Grupo Aval 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 Grupo Aval 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 Grupo Aval, you can compare the effects of market volatilities on Banco Bradesco and Grupo Aval 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 Grupo Aval. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Bradesco and Grupo Aval.

Diversification Opportunities for Banco Bradesco and Grupo Aval

0.42

Correlation Coefficient

Banco Bradesco  Grupo Aval

Very weak diversification

The 3 months correlation between Banco and Grupo is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Banco Bradesco SA and Grupo Aval in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Aval 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 Grupo Aval. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Aval has no effect on the direction of Banco Bradesco i.e., Banco Bradesco and Grupo Aval go up and down completely randomly.

Pair Corralation between Banco Bradesco and Grupo Aval

Given the investment horizon of 90 days Banco Bradesco SA is expected to generate 1.48 times more return on investment than Grupo Aval. However, Banco Bradesco is 1.48 times more volatile than Grupo Aval. It trades about 0.11 of its potential returns per unit of risk. Grupo Aval is currently generating about 0.04 per unit of risk. If you would invest  206.00  in Banco Bradesco SA on May 7, 2025 and sell it today you would earn a total of  40.00  from holding Banco Bradesco SA or generate 19.42% return on investment over 90 days.

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

Banco Bradesco SA  vs.  Grupo Aval

Banco Bradesco SA

Risk-Adjusted Performance

Fair

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 very inconsistent fundamental indicators, Banco Bradesco displayed solid returns over the last few months and may actually be approaching a breakup point.

Grupo Aval

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Aval are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Grupo Aval is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Banco Bradesco and Grupo Aval

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

The idea behind Banco Bradesco SA and Grupo Aval 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.