Correlation Between Itau Unibanco and IQIYI

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

Diversification Opportunities for Itau Unibanco and IQIYI

-0.48

Correlation Coefficient

Itau Unibanco  IQIYI

Very good diversification

The 3 months correlation between Itau and IQIYI is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Itau Unibanco Banco and iQIYI Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iQIYI Inc 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 IQIYI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iQIYI Inc has no effect on the direction of Itau Unibanco i.e., Itau Unibanco and IQIYI go up and down completely randomly.

Pair Corralation between Itau Unibanco and IQIYI

Given the investment horizon of 90 days Itau Unibanco is expected to generate 1.78 times less return on investment than IQIYI. But when comparing it to its historical volatility, Itau Unibanco Banco is 2.22 times less risky than IQIYI. It trades about 0.05 of its potential returns per unit of risk. iQIYI Inc is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  376.00  in iQIYI Inc on February 7, 2024 and sell it today you would earn a total of  133.50  from holding iQIYI Inc or generate 35.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Itau Unibanco Banco  vs.  iQIYI Inc

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

iQIYI Inc

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iQIYI Inc are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, IQIYI reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Itau Unibanco and IQIYI

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

The idea behind Itau Unibanco Banco and iQIYI Inc 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.