Correlation Between Itau Unibanco and First Bancshares

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

Diversification Opportunities for Itau Unibanco and First Bancshares

-0.71

Correlation Coefficient

Itau Unibanco  First Bancshares

Pay attention - limited upside

The 3 months correlation between Itau and First is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Itau Unibanco Banco and First Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Bancshares 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 First Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Bancshares has no effect on the direction of Itau Unibanco i.e., Itau Unibanco and First Bancshares go up and down completely randomly.

Pair Corralation between Itau Unibanco and First Bancshares

Given the investment horizon of 90 days Itau Unibanco Banco is expected to generate 0.36 times more return on investment than First Bancshares. However, Itau Unibanco Banco is 2.75 times less risky than First Bancshares. It trades about 0.27 of its potential returns per unit of risk. First Bancshares is currently generating about -0.04 per unit of risk. If you would invest  500.00  in Itau Unibanco Banco on October 27, 2024 and sell it today you would earn a total of  46.00  from holding Itau Unibanco Banco or generate 9.2% return on investment over 90 days.

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

Itau Unibanco Banco  vs.  First Bancshares

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 latest conflicting performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

First Bancshares

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Bancshares are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, First Bancshares sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Itau Unibanco and First Bancshares

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

The idea behind Itau Unibanco Banco and First Bancshares 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.