Correlation Between Itau Unibanco and Sumitomo Mitsui

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

Diversification Opportunities for Itau Unibanco and Sumitomo Mitsui

0.07

Correlation Coefficient

Itau Unibanco  Sumitomo Mitsui

Significant diversification

The 3 months correlation between Itau and Sumitomo is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Itau Unibanco Banco and Sumitomo Mitsui Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Mitsui Trust 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 Sumitomo Mitsui. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Mitsui Trust has no effect on the direction of Itau Unibanco i.e., Itau Unibanco and Sumitomo Mitsui go up and down completely randomly.

Pair Corralation between Itau Unibanco and Sumitomo Mitsui

Given the investment horizon of 90 days Itau Unibanco Banco is expected to under-perform the Sumitomo Mitsui. But the stock apears to be less risky and, when comparing its historical volatility, Itau Unibanco Banco is 1.77 times less risky than Sumitomo Mitsui. The stock trades about -0.29 of its potential returns per unit of risk. The Sumitomo Mitsui Trust is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,230  in Sumitomo Mitsui Trust on September 26, 2024 and sell it today you would lose (35.00) from holding Sumitomo Mitsui Trust or give up 1.57% of portfolio value over 90 days.

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

Itau Unibanco Banco  vs.  Sumitomo Mitsui Trust

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.

Sumitomo Mitsui Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sumitomo Mitsui Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Sumitomo Mitsui is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Itau Unibanco and Sumitomo Mitsui

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

The idea behind Itau Unibanco Banco and Sumitomo Mitsui Trust 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.