Correlation Between Itau Unibanco and Citizens Financial

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

Diversification Opportunities for Itau Unibanco and Citizens Financial

-0.77

Correlation Coefficient

Itau Unibanco  Citizens Financial

Pay attention - limited upside

The 3 months correlation between Itau and Citizens is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Itau Unibanco Banco and Citizens Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citizens Financial Corp 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 Citizens Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citizens Financial Corp has no effect on the direction of Itau Unibanco i.e., Itau Unibanco and Citizens Financial go up and down completely randomly.

Pair Corralation between Itau Unibanco and Citizens Financial

Given the investment horizon of 90 days Itau Unibanco is expected to generate 1.91 times less return on investment than Citizens Financial. But when comparing it to its historical volatility, Itau Unibanco Banco is 1.63 times less risky than Citizens Financial. It trades about 0.04 of its potential returns per unit of risk. Citizens Financial Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,800  in Citizens Financial Corp on September 24, 2024 and sell it today you would earn a total of  625.00  from holding Citizens Financial Corp or generate 34.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	68.88%
Values	Daily Returns

Itau Unibanco Banco  vs.  Citizens Financial Corp

Itau Unibanco Banco

Risk-Adjusted Performance

0 of 100

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.

Citizens Financial Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citizens Financial Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Citizens Financial showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Itau Unibanco and Citizens Financial

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

The idea behind Itau Unibanco Banco and Citizens Financial Corp 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.