Correlation Between Centrais Electricas and Itau Unibanco

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

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

Diversification Opportunities for Centrais Electricas and Itau Unibanco

0.97

Correlation Coefficient

Centrais Electricas  Itau Unibanco

Almost no diversification

The 3 months correlation between Centrais and Itau is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Centrais Electricas Brasileira 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 Centrais Electricas 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 Centrais Electricas Brasileiras 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 Centrais Electricas i.e., Centrais Electricas and Itau Unibanco go up and down completely randomly.

Pair Corralation between Centrais Electricas and Itau Unibanco

Considering the 90-day investment horizon Centrais Electricas is expected to generate 1.05 times less return on investment than Itau Unibanco. But when comparing it to its historical volatility, Centrais Electricas Brasileiras is 1.04 times less risky than Itau Unibanco. It trades about 0.27 of its potential returns per unit of risk. Itau Unibanco Banco is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  426.00  in Itau Unibanco Banco on December 28, 2024 and sell it today you would earn a total of  134.00  from holding Itau Unibanco Banco or generate 31.46% return on investment over 90 days.

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

Centrais Electricas Brasileira  vs.  Itau Unibanco Banco

Centrais Electricas

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Centrais Electricas Brasileiras are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady fundamental drivers, Centrais Electricas reported solid returns over the last few months and may actually be approaching a breakup point.

Itau Unibanco Banco

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Itau Unibanco Banco are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Itau Unibanco sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Centrais Electricas and Itau Unibanco

The main advantage of trading using opposite Centrais Electricas and Itau Unibanco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Centrais Electricas 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 Centrais Electricas Brasileiras 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.