Correlation Between JPMorgan Chase and Itau Unibanco

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

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

Diversification Opportunities for JPMorgan Chase and Itau Unibanco

0.15

Correlation Coefficient

JPMorgan Chase  Itau Unibanco

Average diversification

The 3 months correlation between JPMorgan and Itau is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan Chase Co and Itau Unibanco Banco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Itau Unibanco Banco and JPMorgan Chase 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 JPMorgan Chase Co are associated (or correlated) with Itau Unibanco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Itau Unibanco Banco has no effect on the direction of JPMorgan Chase i.e., JPMorgan Chase and Itau Unibanco go up and down completely randomly.

Pair Corralation between JPMorgan Chase and Itau Unibanco

Considering the 90-day investment horizon JPMorgan Chase is expected to generate 11.79 times less return on investment than Itau Unibanco. But when comparing it to its historical volatility, JPMorgan Chase Co is 1.14 times less risky than Itau Unibanco. It trades about 0.03 of its potential returns per unit of risk. Itau Unibanco Banco is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  424.00  in Itau Unibanco Banco on December 21, 2024 and sell it today you would earn a total of  142.00  from holding Itau Unibanco Banco or generate 33.49% return on investment over 90 days.

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

JPMorgan Chase Co  vs.  Itau Unibanco Banco

JPMorgan Chase

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Chase Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, JPMorgan Chase is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Itau Unibanco Banco

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Itau Unibanco Banco are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Itau Unibanco sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JPMorgan Chase and Itau Unibanco

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

The idea behind JPMorgan Chase Co and Itau Unibanco Banco 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.