Correlation Between Banco Bradesco and Ita Unibanco

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

Diversification Opportunities for Banco Bradesco and Ita Unibanco

0.63

Correlation Coefficient

Banco Bradesco  Ita Unibanco

Poor diversification

The 3 months correlation between Banco and Ita is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Banco Bradesco SA and Ita Unibanco Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ita Unibanco Holding 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 Ita Unibanco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ita Unibanco Holding has no effect on the direction of Banco Bradesco i.e., Banco Bradesco and Ita Unibanco go up and down completely randomly.

Pair Corralation between Banco Bradesco and Ita Unibanco

Assuming the 90 days trading horizon Banco Bradesco SA is expected to generate 1.42 times more return on investment than Ita Unibanco. However, Banco Bradesco is 1.42 times more volatile than Ita Unibanco Holding. It trades about 0.12 of its potential returns per unit of risk. Ita Unibanco Holding is currently generating about 0.13 per unit of risk. If you would invest  1,614  in Banco Bradesco SA on April 5, 2025 and sell it today you would earn a total of  61.00  from holding Banco Bradesco SA or generate 3.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Banco Bradesco SA  vs.  Ita Unibanco Holding

Banco Bradesco SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Bradesco SA are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Banco Bradesco unveiled solid returns over the last few months and may actually be approaching a breakup point.

Ita Unibanco Holding

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ita Unibanco Holding are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Ita Unibanco unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Banco Bradesco and Ita Unibanco

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

The idea behind Banco Bradesco SA and Ita Unibanco Holding 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.