Correlation Between Ita Unibanco and ARNC34

Can any of the company-specific risk be diversified away by investing in both Ita Unibanco and ARNC34 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 Ita Unibanco and ARNC34 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ita Unibanco Holding and ARNC34, you can compare the effects of market volatilities on Ita Unibanco and ARNC34 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 Ita Unibanco with a short position of ARNC34. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ita Unibanco and ARNC34.

Diversification Opportunities for Ita Unibanco and ARNC34

-0.82

Correlation Coefficient

Ita Unibanco  ARNC34

Pay attention - limited upside

The 3 months correlation between Ita and ARNC34 is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Ita Unibanco Holding and ARNC34 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARNC34 and Ita 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 Ita Unibanco Holding are associated (or correlated) with ARNC34. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARNC34 has no effect on the direction of Ita Unibanco i.e., Ita Unibanco and ARNC34 go up and down completely randomly.

Pair Corralation between Ita Unibanco and ARNC34

Assuming the 90 days trading horizon Ita Unibanco Holding is expected to under-perform the ARNC34. But the stock apears to be less risky and, when comparing its historical volatility, Ita Unibanco Holding is 1.49 times less risky than ARNC34. The stock trades about -0.17 of its potential returns per unit of risk. The ARNC34 is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  54,674  in ARNC34 on September 25, 2024 and sell it today you would earn a total of  13,599  from holding ARNC34 or generate 24.87% return on investment over 90 days.

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

Ita Unibanco Holding  vs.  ARNC34

Ita Unibanco Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ita Unibanco Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

ARNC34

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ARNC34 are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ARNC34 sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ita Unibanco and ARNC34

The main advantage of trading using opposite Ita Unibanco and ARNC34 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ita Unibanco position performs unexpectedly, ARNC34 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 ARNC34 will offset losses from the drop in ARNC34's long position.

The idea behind Ita Unibanco Holding and ARNC34 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.