Correlation Between Itau Unibanco and Andover Bancorp

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

Diversification Opportunities for Itau Unibanco and Andover Bancorp

0.12
  Correlation Coefficient

Average diversification

The 3 months correlation between Itau and Andover is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Itau Unibanco Banco and Andover Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Andover Bancorp 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 Andover Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Andover Bancorp has no effect on the direction of Itau Unibanco i.e., Itau Unibanco and Andover Bancorp go up and down completely randomly.

Pair Corralation between Itau Unibanco and Andover Bancorp

Given the investment horizon of 90 days Itau Unibanco Banco is expected to under-perform the Andover Bancorp. But the stock apears to be less risky and, when comparing its historical volatility, Itau Unibanco Banco is 1.97 times less risky than Andover Bancorp. The stock trades about -0.24 of its potential returns per unit of risk. The Andover Bancorp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,900  in Andover Bancorp on September 30, 2024 and sell it today you would earn a total of  100.00  from holding Andover Bancorp or generate 5.26% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Itau Unibanco Banco  vs.  Andover Bancorp

 Performance 
       Timeline  
Itau Unibanco Banco 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 conflicting performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
Andover Bancorp 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Andover Bancorp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Andover Bancorp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Itau Unibanco and Andover Bancorp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Itau Unibanco and Andover Bancorp

The main advantage of trading using opposite Itau Unibanco and Andover Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Itau Unibanco position performs unexpectedly, Andover Bancorp 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 Andover Bancorp will offset losses from the drop in Andover Bancorp's long position.
The idea behind Itau Unibanco Banco and Andover Bancorp 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.

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