Correlation Between Itau Unibanco and Washington Federal

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

Diversification Opportunities for Itau Unibanco and Washington Federal

0.53

Correlation Coefficient

Itau Unibanco  Washington Federal

Very weak diversification

The 3 months correlation between Itau and Washington is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Itau Unibanco Banco and Washington Federal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Washington Federal 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 Washington Federal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Washington Federal has no effect on the direction of Itau Unibanco i.e., Itau Unibanco and Washington Federal go up and down completely randomly.

Pair Corralation between Itau Unibanco and Washington Federal

Given the investment horizon of 90 days Itau Unibanco Banco is expected to generate 0.93 times more return on investment than Washington Federal. However, Itau Unibanco Banco is 1.07 times less risky than Washington Federal. It trades about 0.27 of its potential returns per unit of risk. Washington Federal is currently generating about -0.3 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 Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Itau Unibanco Banco  vs.  Washington Federal

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.

Washington Federal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Washington Federal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Itau Unibanco and Washington Federal

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

The idea behind Itau Unibanco Banco and Washington Federal 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.