Correlation Between Itau Unibanco and Banco Santander

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

Diversification Opportunities for Itau Unibanco and Banco Santander

0.91

Correlation Coefficient

Itau Unibanco  Banco Santander

Almost no diversification

The 3 months correlation between Itau and Banco is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Itau Unibanco Banco and Banco Santander Brasil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Santander Brasil 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 Banco Santander. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Santander Brasil has no effect on the direction of Itau Unibanco i.e., Itau Unibanco and Banco Santander go up and down completely randomly.

Pair Corralation between Itau Unibanco and Banco Santander

Given the investment horizon of 90 days Itau Unibanco Banco is expected to generate 0.81 times more return on investment than Banco Santander. However, Itau Unibanco Banco is 1.24 times less risky than Banco Santander. It trades about 0.28 of its potential returns per unit of risk. Banco Santander Brasil is currently generating about 0.18 per unit of risk. If you would invest  425.00  in Itau Unibanco Banco on December 27, 2024 and sell it today you would earn a total of  137.00  from holding Itau Unibanco Banco or generate 32.24% return on investment over 90 days.

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

Itau Unibanco Banco  vs.  Banco Santander Brasil

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 22 (%) 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.

Banco Santander Brasil

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Santander Brasil are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent fundamental drivers, Banco Santander reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Itau Unibanco and Banco Santander

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

The idea behind Itau Unibanco Banco and Banco Santander Brasil 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.