Correlation Between Itau Unibanco and Laurentian Bank

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

Diversification Opportunities for Itau Unibanco and Laurentian Bank

-0.74

Correlation Coefficient

Itau Unibanco  Laurentian Bank

Pay attention - limited upside

The 3 months correlation between Itau and Laurentian is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Itau Unibanco Banco and Laurentian Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laurentian Bank 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 Laurentian Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Laurentian Bank has no effect on the direction of Itau Unibanco i.e., Itau Unibanco and Laurentian Bank go up and down completely randomly.

Pair Corralation between Itau Unibanco and Laurentian Bank

Given the investment horizon of 90 days Itau Unibanco Banco is expected to generate 1.17 times more return on investment than Laurentian Bank. However, Itau Unibanco is 1.17 times more volatile than Laurentian Bank of. It trades about 0.18 of its potential returns per unit of risk. Laurentian Bank of is currently generating about -0.06 per unit of risk. If you would invest  478.00  in Itau Unibanco Banco on December 20, 2024 and sell it today you would earn a total of  95.00  from holding Itau Unibanco Banco or generate 19.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	91.53%
Values	Daily Returns

Itau Unibanco Banco  vs.  Laurentian Bank of

Itau Unibanco Banco

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Itau Unibanco Banco are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Itau Unibanco sustained solid returns over the last few months and may actually be approaching a breakup point.

Laurentian Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Laurentian Bank of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Laurentian Bank 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 Laurentian Bank

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

The idea behind Itau Unibanco Banco and Laurentian Bank of 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.

Check out your portfolio center.

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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.