Correlation Between Itau Unibanco and Lloyds Banking

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

Diversification Opportunities for Itau Unibanco and Lloyds Banking

0.67

Correlation Coefficient

Itau Unibanco  Lloyds Banking

Poor diversification

The 3 months correlation between Itau and Lloyds is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Itau Unibanco Banco and Lloyds Banking Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lloyds Banking Group 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 Lloyds Banking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lloyds Banking Group has no effect on the direction of Itau Unibanco i.e., Itau Unibanco and Lloyds Banking go up and down completely randomly.

Pair Corralation between Itau Unibanco and Lloyds Banking

Given the investment horizon of 90 days Itau Unibanco Banco is expected to under-perform the Lloyds Banking. But the stock apears to be less risky and, when comparing its historical volatility, Itau Unibanco Banco is 1.1 times less risky than Lloyds Banking. The stock trades about -0.26 of its potential returns per unit of risk. The Lloyds Banking Group is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  69.00  in Lloyds Banking Group on September 22, 2024 and sell it today you would lose (2.00) from holding Lloyds Banking Group or give up 2.9% of portfolio value over 90 days.

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

Itau Unibanco Banco  vs.  Lloyds Banking Group

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.

Lloyds Banking Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lloyds Banking Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Itau Unibanco and Lloyds Banking

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

The idea behind Itau Unibanco Banco and Lloyds Banking Group 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.