Correlation Between Ita Unibanco and Howmet Aerospace

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

Diversification Opportunities for Ita Unibanco and Howmet Aerospace

0.2

Correlation Coefficient

Ita Unibanco  Howmet Aerospace

Modest diversification

The 3 months correlation between Ita and Howmet is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Ita Unibanco Holding and Howmet Aerospace in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Howmet Aerospace 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 Howmet Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Howmet Aerospace has no effect on the direction of Ita Unibanco i.e., Ita Unibanco and Howmet Aerospace go up and down completely randomly.

Pair Corralation between Ita Unibanco and Howmet Aerospace

Assuming the 90 days trading horizon Ita Unibanco Holding is expected to generate 0.84 times more return on investment than Howmet Aerospace. However, Ita Unibanco Holding is 1.2 times less risky than Howmet Aerospace. It trades about 0.21 of its potential returns per unit of risk. Howmet Aerospace is currently generating about 0.09 per unit of risk. If you would invest  2,317  in Ita Unibanco Holding on December 23, 2024 and sell it today you would earn a total of  526.00  from holding Ita Unibanco Holding or generate 22.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Ita Unibanco Holding  vs.  Howmet Aerospace

Ita Unibanco Holding

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ita Unibanco Holding are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Ita Unibanco unveiled solid returns over the last few months and may actually be approaching a breakup point.

Howmet Aerospace

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Howmet Aerospace are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Howmet Aerospace may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Ita Unibanco and Howmet Aerospace

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

The idea behind Ita Unibanco Holding and Howmet Aerospace 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.