Correlation Between Ita Unibanco and Cummins

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

Diversification Opportunities for Ita Unibanco and Cummins

-0.47

Correlation Coefficient

Ita Unibanco  Cummins

Very good diversification

The 3 months correlation between Ita and Cummins is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Ita Unibanco Holding and Cummins in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cummins 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 Cummins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cummins has no effect on the direction of Ita Unibanco i.e., Ita Unibanco and Cummins go up and down completely randomly.

Pair Corralation between Ita Unibanco and Cummins

Assuming the 90 days trading horizon Ita Unibanco Holding is expected to under-perform the Cummins. But the preferred stock apears to be less risky and, when comparing its historical volatility, Ita Unibanco Holding is 1.99 times less risky than Cummins. The preferred stock trades about -0.01 of its potential returns per unit of risk. The Cummins is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  37,042  in Cummins on October 9, 2024 and sell it today you would earn a total of  17,663  from holding Cummins or generate 47.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.39%
Values	Daily Returns

Ita Unibanco Holding  vs.  Cummins

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 latest uncertain performance, the Preferred Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Cummins

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cummins are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain primary indicators, Cummins sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ita Unibanco and Cummins

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

The idea behind Ita Unibanco Holding and Cummins 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.