Correlation Between Ita Unibanco and Gerdau SA

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

Diversification Opportunities for Ita Unibanco and Gerdau SA

-0.26

Correlation Coefficient

Ita Unibanco  Gerdau SA

Very good diversification

The 3 months correlation between Ita and Gerdau is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Ita Unibanco Holding and Gerdau SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gerdau SA 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 Gerdau SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gerdau SA has no effect on the direction of Ita Unibanco i.e., Ita Unibanco and Gerdau SA go up and down completely randomly.

Pair Corralation between Ita Unibanco and Gerdau SA

Assuming the 90 days trading horizon Ita Unibanco Holding is expected to generate 0.89 times more return on investment than Gerdau SA. However, Ita Unibanco Holding is 1.12 times less risky than Gerdau SA. It trades about 0.07 of its potential returns per unit of risk. Gerdau SA is currently generating about -0.18 per unit of risk. If you would invest  3,084  in Ita Unibanco Holding on November 28, 2024 and sell it today you would earn a total of  201.00  from holding Ita Unibanco Holding or generate 6.52% return on investment over 90 days.

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

Ita Unibanco Holding  vs.  Gerdau SA

Ita Unibanco Holding

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ita Unibanco Holding are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Ita Unibanco may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Gerdau SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gerdau SA 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 Preferred Stock's basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Ita Unibanco and Gerdau SA

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

The idea behind Ita Unibanco Holding and Gerdau SA 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.