Correlation Between Itasa Investimentos and Banestes

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

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

Diversification Opportunities for Itasa Investimentos and Banestes

-0.06

Correlation Coefficient

Itasa Investimentos  Banestes

Good diversification

The 3 months correlation between Itasa and Banestes is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Itasa Investimentos and Banestes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banestes SA and Itasa Investimentos 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 Itasa Investimentos are associated (or correlated) with Banestes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banestes SA has no effect on the direction of Itasa Investimentos i.e., Itasa Investimentos and Banestes go up and down completely randomly.

Pair Corralation between Itasa Investimentos and Banestes

Assuming the 90 days trading horizon Itasa Investimentos is expected to generate 1.48 times more return on investment than Banestes. However, Itasa Investimentos is 1.48 times more volatile than Banestes SA . It trades about -0.01 of its potential returns per unit of risk. Banestes SA is currently generating about -0.05 per unit of risk. If you would invest  898.00  in Itasa Investimentos on December 2, 2024 and sell it today you would lose (19.00) from holding Itasa Investimentos or give up 2.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Itasa Investimentos  vs.  Banestes SA

Itasa Investimentos

Risk-Adjusted Performance

Very Weak

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

Banestes SA

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Itasa Investimentos and Banestes

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

The idea behind Itasa Investimentos and Banestes SA 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.