Correlation Between Itau Unibanco and Baudax BioInc

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

Diversification Opportunities for Itau Unibanco and Baudax BioInc

-0.52
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Itau and Baudax is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Itau Unibanco Banco and Baudax BioInc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baudax BioInc 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 Baudax BioInc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baudax BioInc has no effect on the direction of Itau Unibanco i.e., Itau Unibanco and Baudax BioInc go up and down completely randomly.

Pair Corralation between Itau Unibanco and Baudax BioInc

Given the investment horizon of 90 days Itau Unibanco Banco is expected to generate 0.16 times more return on investment than Baudax BioInc. However, Itau Unibanco Banco is 6.1 times less risky than Baudax BioInc. It trades about 0.04 of its potential returns per unit of risk. Baudax BioInc is currently generating about -0.07 per unit of risk. If you would invest  503.00  in Itau Unibanco Banco on December 30, 2023 and sell it today you would earn a total of  190.00  from holding Itau Unibanco Banco or generate 37.77% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Itau Unibanco Banco  vs.  Baudax BioInc

 Performance 
       Timeline  
Itau Unibanco Banco 

Risk-Adjusted Performance

4 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Itau Unibanco Banco are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.
Baudax BioInc 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Baudax BioInc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Itau Unibanco and Baudax BioInc Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Itau Unibanco and Baudax BioInc

The main advantage of trading using opposite Itau Unibanco and Baudax BioInc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Itau Unibanco position performs unexpectedly, Baudax BioInc 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 Baudax BioInc will offset losses from the drop in Baudax BioInc's long position.
The idea behind Itau Unibanco Banco and Baudax BioInc 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.

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