Correlation Between Ambev SA and Ita Unibanco

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

By analyzing existing cross correlation between Ambev SA and Ita Unibanco Holding, you can compare the effects of market volatilities on Ambev SA and Ita 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 Ambev SA with a short position of Ita Unibanco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ambev SA and Ita Unibanco.

Diversification Opportunities for Ambev SA and Ita Unibanco

0.37

Correlation Coefficient

Ambev SA  Ita Unibanco

Weak diversification

The 3 months correlation between Ambev and Ita is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Ambev SA and Ita Unibanco Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ita Unibanco Holding and Ambev SA 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 Ambev SA are associated (or correlated) with Ita Unibanco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ita Unibanco Holding has no effect on the direction of Ambev SA i.e., Ambev SA and Ita Unibanco go up and down completely randomly.

Pair Corralation between Ambev SA and Ita Unibanco

Assuming the 90 days trading horizon Ambev SA is expected to generate 1.01 times more return on investment than Ita Unibanco. However, Ambev SA is 1.01 times more volatile than Ita Unibanco Holding. It trades about 0.0 of its potential returns per unit of risk. Ita Unibanco Holding is currently generating about -0.16 per unit of risk. If you would invest  1,280  in Ambev SA on September 3, 2024 and sell it today you would lose (7.00) from holding Ambev SA or give up 0.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Ambev SA  vs.  Ita Unibanco Holding

Ambev SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ambev SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Ambev SA is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Ita Unibanco Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ita Unibanco Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Preferred Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Ambev SA and Ita Unibanco

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

The idea behind Ambev SA and Ita Unibanco Holding 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.