Correlation Between Veritex Holdings and Banco Bradesco

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

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

Diversification Opportunities for Veritex Holdings and Banco Bradesco

-0.88

Correlation Coefficient

Veritex Holdings  Banco Bradesco

Pay attention - limited upside

The 3 months correlation between Veritex and Banco is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Veritex Holdings 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 Veritex Holdings 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 Veritex Holdings 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 Veritex Holdings i.e., Veritex Holdings and Banco Bradesco go up and down completely randomly.

Pair Corralation between Veritex Holdings and Banco Bradesco

Given the investment horizon of 90 days Veritex Holdings is expected to generate 0.7 times more return on investment than Banco Bradesco. However, Veritex Holdings is 1.43 times less risky than Banco Bradesco. It trades about -0.06 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  3,034  in Veritex Holdings on September 13, 2024 and sell it today you would lose (63.00) from holding Veritex Holdings or give up 2.08% of portfolio value over 90 days.

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

Veritex Holdings  vs.  Banco Bradesco SA

Veritex Holdings

Risk-Adjusted Performance

11 of 100

Good

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

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 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.

Pair Trading with Veritex Holdings and Banco Bradesco

The main advantage of trading using opposite Veritex Holdings and Banco Bradesco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Veritex Holdings 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 Veritex Holdings 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.