Correlation Between Itau Unibanco and Community Heritage

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

Diversification Opportunities for Itau Unibanco and Community Heritage

-0.9

Correlation Coefficient

Itau Unibanco  Community Heritage

Pay attention - limited upside

The 3 months correlation between Itau and Community is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Itau Unibanco Banco and Community Heritage Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Community Heritage 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 Community Heritage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Community Heritage has no effect on the direction of Itau Unibanco i.e., Itau Unibanco and Community Heritage go up and down completely randomly.

Pair Corralation between Itau Unibanco and Community Heritage

Given the investment horizon of 90 days Itau Unibanco Banco is expected to under-perform the Community Heritage. In addition to that, Itau Unibanco is 1.99 times more volatile than Community Heritage Financial. It trades about -0.24 of its total potential returns per unit of risk. Community Heritage Financial is currently generating about 0.24 per unit of volatility. If you would invest  2,094  in Community Heritage Financial on September 28, 2024 and sell it today you would earn a total of  306.00  from holding Community Heritage Financial or generate 14.61% return on investment over 90 days.

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

Itau Unibanco Banco  vs.  Community Heritage Financial

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.

Community Heritage

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Community Heritage Financial are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent technical indicators, Community Heritage reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Itau Unibanco and Community Heritage

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

The idea behind Itau Unibanco Banco and Community Heritage Financial 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.