Correlation Between Aris Water and Itau Unibanco

Can any of the company-specific risk be diversified away by investing in both Aris Water and Itau 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 Aris Water and Itau Unibanco into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aris Water Solutions and Itau Unibanco Banco, you can compare the effects of market volatilities on Aris Water and Itau 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 Aris Water with a short position of Itau Unibanco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aris Water and Itau Unibanco.

Diversification Opportunities for Aris Water and Itau Unibanco

-0.1

Correlation Coefficient

Aris Water  Itau Unibanco

Good diversification

The 3 months correlation between Aris and Itau is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Aris Water Solutions and Itau Unibanco Banco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Itau Unibanco Banco and Aris Water 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 Aris Water Solutions are associated (or correlated) with Itau Unibanco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Itau Unibanco Banco has no effect on the direction of Aris Water i.e., Aris Water and Itau Unibanco go up and down completely randomly.

Pair Corralation between Aris Water and Itau Unibanco

Given the investment horizon of 90 days Aris Water Solutions is expected to generate 0.99 times more return on investment than Itau Unibanco. However, Aris Water Solutions is 1.01 times less risky than Itau Unibanco. It trades about 0.13 of its potential returns per unit of risk. Itau Unibanco Banco is currently generating about -0.21 per unit of risk. If you would invest  1,412  in Aris Water Solutions on January 29, 2024 and sell it today you would earn a total of  69.00  from holding Aris Water Solutions or generate 4.89% return on investment over 90 days.

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

Aris Water Solutions  vs.  Itau Unibanco Banco

Aris Water Solutions

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aris Water Solutions are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward indicators, Aris Water unveiled solid returns over the last few months and may actually be approaching a breakup point.

Itau Unibanco Banco

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Itau Unibanco Banco has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Itau Unibanco is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Aris Water and Itau Unibanco

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

The idea behind Aris Water Solutions and Itau Unibanco Banco 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.