Correlation Between Itau Unibanco and West Shore

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

Diversification Opportunities for Itau Unibanco and West Shore

-0.88

Correlation Coefficient

Itau Unibanco  West Shore

Pay attention - limited upside

The 3 months correlation between Itau and West is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Itau Unibanco Banco and West Shore Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on West Shore 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 West Shore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of West Shore Bank has no effect on the direction of Itau Unibanco i.e., Itau Unibanco and West Shore go up and down completely randomly.

Pair Corralation between Itau Unibanco and West Shore

Given the investment horizon of 90 days Itau Unibanco Banco is expected to under-perform the West Shore. In addition to that, Itau Unibanco is 1.6 times more volatile than West Shore Bank. It trades about -0.06 of its total potential returns per unit of risk. West Shore Bank is currently generating about 0.1 per unit of volatility. If you would invest  2,450  in West Shore Bank on October 10, 2024 and sell it today you would earn a total of  60.00  from holding West Shore Bank or generate 2.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Itau Unibanco Banco  vs.  West Shore Bank

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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

West Shore Bank

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in West Shore Bank are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, West Shore is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Itau Unibanco and West Shore

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

The idea behind Itau Unibanco Banco and West Shore Bank 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.