Correlation Between Fifth Third and BRADESCO

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

Diversification Opportunities for Fifth Third and BRADESCO

0.4
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Fifth and BRADESCO is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Fifth Third Bancorp and BRADESCO PN EJ N1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRADESCO PN EJ and Fifth Third 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 Fifth Third Bancorp are associated (or correlated) with BRADESCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRADESCO PN EJ has no effect on the direction of Fifth Third i.e., Fifth Third and BRADESCO go up and down completely randomly.

Pair Corralation between Fifth Third and BRADESCO

Assuming the 90 days horizon Fifth Third Bancorp is expected to generate 0.88 times more return on investment than BRADESCO. However, Fifth Third Bancorp is 1.14 times less risky than BRADESCO. It trades about -0.2 of its potential returns per unit of risk. BRADESCO PN EJ is currently generating about -0.5 per unit of risk. If you would invest  2,545  in Fifth Third Bancorp on March 29, 2022 and sell it today you would lose (96.00)  from holding Fifth Third Bancorp or give up 3.77% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy95.0%
ValuesDaily Returns

Fifth Third Bancorp  vs.  BRADESCO PN EJ N1

 Performance (%) 
      Timeline 
Fifth Third Bancorp 
Fifth Performance
0 of 100
Over the last 90 days Fifth Third Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental drivers, Fifth Third is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the insiders.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0607
Payout Ratio
0.0155
Forward Annual Dividend Rate
1.5
Dividend Date
2022-03-31
Ex Dividend Date
2022-06-27

Fifth Price Channel

BRADESCO PN EJ 
BRADESCO Performance
0 of 100
Over the last 90 days BRADESCO PN EJ has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

BRADESCO Price Channel

Fifth Third and BRADESCO Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Fifth Third and BRADESCO

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

Fifth Third Bancorp

Pair trading matchups for Fifth Third

Merck vs. Fifth Third
Chevron Corp vs. Fifth Third
Conagra Brands vs. Fifth Third
Macroaxis vs. Fifth Third
Micron Technology vs. Fifth Third
Teucrium Corn vs. Fifth Third
Northrop Grumman vs. Fifth Third
Verizon Communications vs. Fifth Third
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Fifth Third as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Fifth Third's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Fifth Third's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Fifth Third Bancorp.
The idea behind Fifth Third Bancorp and BRADESCO PN EJ 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.

BRADESCO PN EJ

Pair trading matchups for BRADESCO

Conagra Brands vs. BRADESCO
Cincinnati Financial vs. BRADESCO
Merck vs. BRADESCO
Verizon Communications vs. BRADESCO
Chevron Corp vs. BRADESCO
Macroaxis vs. BRADESCO
Home Depot vs. BRADESCO
Northrop Grumman vs. BRADESCO
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against BRADESCO as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. BRADESCO's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, BRADESCO's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to BRADESCO PN EJ.
Check out your portfolio center. 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 Global Correlations module to find global opportunities by holding instruments from different markets.

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