Correlation Between Alfa Holdings and Ita Unibanco

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

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

Diversification Opportunities for Alfa Holdings and Ita Unibanco

0.06

Correlation Coefficient

Alfa Holdings  Ita Unibanco

Significant diversification

The 3 months correlation between Alfa and Ita is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Alfa Holdings SA and Ita Unibanco Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ita Unibanco Holding and Alfa Holdings 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 Alfa Holdings SA are associated (or correlated) with Ita Unibanco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ita Unibanco Holding has no effect on the direction of Alfa Holdings i.e., Alfa Holdings and Ita Unibanco go up and down completely randomly.

Pair Corralation between Alfa Holdings and Ita Unibanco

Assuming the 90 days trading horizon Alfa Holdings SA is expected to under-perform the Ita Unibanco. In addition to that, Alfa Holdings is 3.38 times more volatile than Ita Unibanco Holding. It trades about -0.09 of its total potential returns per unit of risk. Ita Unibanco Holding is currently generating about 0.2 per unit of volatility. If you would invest  2,653  in Ita Unibanco Holding on December 27, 2024 and sell it today you would earn a total of  556.00  from holding Ita Unibanco Holding or generate 20.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	76.67%
Values	Daily Returns

Alfa Holdings SA  vs.  Ita Unibanco Holding

Alfa Holdings SA

Risk-Adjusted Performance

Very Weak

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

Ita Unibanco Holding

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ita Unibanco Holding are ranked lower than 15 (%) 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.

Pair Trading with Alfa Holdings and Ita Unibanco

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

The idea behind Alfa Holdings SA and Ita Unibanco Holding 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.