Correlation Between Aozora Bank and Itau Unibanco
Can any of the company-specific risk be diversified away by investing in both Aozora Bank 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 Aozora Bank and Itau Unibanco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aozora Bank Ltd and Itau Unibanco Banco, you can compare the effects of market volatilities on Aozora Bank 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 Aozora Bank with a short position of Itau Unibanco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aozora Bank and Itau Unibanco.
Diversification Opportunities for Aozora Bank and Itau Unibanco
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Aozora and Itau is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Aozora Bank Ltd 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 Aozora Bank 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 Aozora Bank Ltd 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 Aozora Bank i.e., Aozora Bank and Itau Unibanco go up and down completely randomly.
Pair Corralation between Aozora Bank and Itau Unibanco
Assuming the 90 days horizon Aozora Bank Ltd is expected to under-perform the Itau Unibanco. In addition to that, Aozora Bank is 1.5 times more volatile than Itau Unibanco Banco. It trades about -0.24 of its total potential returns per unit of risk. Itau Unibanco Banco is currently generating about 0.22 per unit of volatility. If you would invest 497.00 in Itau Unibanco Banco on October 22, 2024 and sell it today you would earn a total of 35.00 from holding Itau Unibanco Banco or generate 7.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 94.74% |
| Values | Daily Returns |
Aozora Bank Ltd vs. Itau Unibanco Banco
Performance |
| Timeline |
| Aozora Bank |
| Itau Unibanco Banco |
Aozora Bank and Itau Unibanco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aozora Bank and Itau Unibanco
The main advantage of trading using opposite Aozora Bank and Itau Unibanco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aozora Bank 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 Aozora Bank Ltd 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.| Itau Unibanco vs. Grupo Financiero Galicia | Itau Unibanco vs. Banco Macro SA | Itau Unibanco vs. Banco Santander Brasil | Itau Unibanco vs. Lloyds Banking Group |
Check out your portfolio center.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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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