Correlation Between Itau Unibanco and BankInvest Optima

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

By analyzing existing cross correlation between Itau Unibanco Banco and BankInvest Optima 30, you can compare the effects of market volatilities on Itau Unibanco and BankInvest Optima 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 Itau Unibanco with a short position of BankInvest Optima. Check out your portfolio center. Please also check ongoing floating volatility patterns of Itau Unibanco and BankInvest Optima.

Diversification Opportunities for Itau Unibanco and BankInvest Optima

0.34

Correlation Coefficient

Itau Unibanco  BankInvest Optima

Weak diversification

The 3 months correlation between Itau and BankInvest is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Itau Unibanco Banco and BankInvest Optima 30 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BankInvest Optima and Itau Unibanco 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 Itau Unibanco Banco are associated (or correlated) with BankInvest Optima. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BankInvest Optima has no effect on the direction of Itau Unibanco i.e., Itau Unibanco and BankInvest Optima go up and down completely randomly.

Pair Corralation between Itau Unibanco and BankInvest Optima

Given the investment horizon of 90 days Itau Unibanco Banco is expected to under-perform the BankInvest Optima. In addition to that, Itau Unibanco is 7.27 times more volatile than BankInvest Optima 30. It trades about -0.17 of its total potential returns per unit of risk. BankInvest Optima 30 is currently generating about -0.31 per unit of volatility. If you would invest  10,445  in BankInvest Optima 30 on January 24, 2024 and sell it today you would lose (160.00) from holding BankInvest Optima 30 or give up 1.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	86.36%
Values	Daily Returns

Itau Unibanco Banco  vs.  BankInvest Optima 30

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 recent stock price disturbance, may contribute to short-term losses for the investors.

BankInvest Optima

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BankInvest Optima 30 are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, BankInvest Optima is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Itau Unibanco and BankInvest Optima

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

The idea behind Itau Unibanco Banco and BankInvest Optima 30 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.