Correlation Between ECB Bancorp and Banco Bradesco

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

Diversification Opportunities for ECB Bancorp and Banco Bradesco

-0.72
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between ECB and Banco is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding ECB Bancorp 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 ECB Bancorp 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 ECB Bancorp 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 ECB Bancorp i.e., ECB Bancorp and Banco Bradesco go up and down completely randomly.

Pair Corralation between ECB Bancorp and Banco Bradesco

Given the investment horizon of 90 days ECB Bancorp is expected to generate 0.56 times more return on investment than Banco Bradesco. However, ECB Bancorp is 1.79 times less risky than Banco Bradesco. It trades about 0.0 of its potential returns per unit of risk. Banco Bradesco SA is currently generating about -0.19 per unit of risk. If you would invest  1,509  in ECB Bancorp on September 13, 2024 and sell it today you would lose (4.00) from holding ECB Bancorp or give up 0.27% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

ECB Bancorp  vs.  Banco Bradesco SA

 Performance 
       Timeline  
ECB Bancorp 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in ECB Bancorp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental drivers, ECB Bancorp disclosed solid returns over the last few months and may actually be approaching a breakup point.
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.

ECB Bancorp and Banco Bradesco Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ECB Bancorp and Banco Bradesco

The main advantage of trading using opposite ECB Bancorp and Banco Bradesco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ECB Bancorp 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 ECB Bancorp 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.

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