Correlation Between Bank of America and Ita Unibanco
Can any of the company-specific risk be diversified away by investing in both Bank of America 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 Bank of America and Ita Unibanco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of America and Ita Unibanco Holding, you can compare the effects of market volatilities on Bank of America 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 Bank of America with a short position of Ita Unibanco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Ita Unibanco.
Diversification Opportunities for Bank of America and Ita Unibanco
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bank and Ita is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America 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 Bank of America 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 Bank of America 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 Bank of America i.e., Bank of America and Ita Unibanco go up and down completely randomly.
Pair Corralation between Bank of America and Ita Unibanco
Assuming the 90 days trading horizon Bank of America is expected to under-perform the Ita Unibanco. In addition to that, Bank of America is 1.15 times more volatile than Ita Unibanco Holding. It trades about -0.21 of its total potential returns per unit of risk. Ita Unibanco Holding is currently generating about 0.4 per unit of volatility. If you would invest 2,830 in Ita Unibanco Holding on November 18, 2024 and sell it today you would earn a total of 272.00 from holding Ita Unibanco Holding or generate 9.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Ita Unibanco Holding
Performance |
| Timeline |
| Bank of America |
| Ita Unibanco Holding |
Bank of America and Ita Unibanco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Ita Unibanco
The main advantage of trading using opposite Bank of America and Ita Unibanco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America 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.| Bank of America vs. Applied Materials, | Bank of America vs. Electronic Arts | Bank of America vs. Monster Beverage | Bank of America vs. United Rentals |
| Ita Unibanco vs. Banco Bradesco SA | Ita Unibanco vs. Engie Brasil Energia | Ita Unibanco vs. Itasa Investimentos | Ita Unibanco vs. Porto Seguro SA |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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