Correlation Between Itau Unibanco and Raiffeisen Bank

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

Diversification Opportunities for Itau Unibanco and Raiffeisen Bank

-0.27

Correlation Coefficient

Itau Unibanco  Raiffeisen Bank

Very good diversification

The 3 months correlation between Itau and Raiffeisen is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Itau Unibanco Banco and Raiffeisen Bank International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raiffeisen Bank Inte 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 Raiffeisen Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raiffeisen Bank Inte has no effect on the direction of Itau Unibanco i.e., Itau Unibanco and Raiffeisen Bank go up and down completely randomly.

Pair Corralation between Itau Unibanco and Raiffeisen Bank

Given the investment horizon of 90 days Itau Unibanco Banco is expected to under-perform the Raiffeisen Bank. But the stock apears to be less risky and, when comparing its historical volatility, Itau Unibanco Banco is 1.31 times less risky than Raiffeisen Bank. The stock trades about -0.27 of its potential returns per unit of risk. The Raiffeisen Bank International is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  462.00  in Raiffeisen Bank International on September 28, 2024 and sell it today you would earn a total of  48.00  from holding Raiffeisen Bank International or generate 10.39% return on investment over 90 days.

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

Itau Unibanco Banco  vs.  Raiffeisen Bank International

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.

Raiffeisen Bank Inte

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Raiffeisen Bank International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Raiffeisen Bank is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Itau Unibanco and Raiffeisen Bank

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

The idea behind Itau Unibanco Banco and Raiffeisen Bank International 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.