Correlation Between IRB Brasil and Itasa Investimentos
Can any of the company-specific risk be diversified away by investing in both IRB Brasil and Itasa Investimentos 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 IRB Brasil and Itasa Investimentos into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IRB Brasil Resseguros SA and Itasa Investimentos, you can compare the effects of market volatilities on IRB Brasil and Itasa Investimentos 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 IRB Brasil with a short position of Itasa Investimentos. Check out your portfolio center. Please also check ongoing floating volatility patterns of IRB Brasil and Itasa Investimentos.
Diversification Opportunities for IRB Brasil and Itasa Investimentos
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IRB and Itasa is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding IRB Brasil Resseguros SA and Itasa Investimentos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Itasa Investimentos and IRB Brasil 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 IRB Brasil Resseguros SA are associated (or correlated) with Itasa Investimentos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Itasa Investimentos has no effect on the direction of IRB Brasil i.e., IRB Brasil and Itasa Investimentos go up and down completely randomly.
Pair Corralation between IRB Brasil and Itasa Investimentos
Assuming the 90 days trading horizon IRB Brasil Resseguros SA is expected to generate 1.61 times more return on investment than Itasa Investimentos. However, IRB Brasil is 1.61 times more volatile than Itasa Investimentos. It trades about -0.02 of its potential returns per unit of risk. Itasa Investimentos is currently generating about -0.22 per unit of risk. If you would invest 4,169 in IRB Brasil Resseguros SA on September 2, 2024 and sell it today you would lose (70.00) from holding IRB Brasil Resseguros SA or give up 1.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
IRB Brasil Resseguros SA vs. Itasa Investimentos
Performance |
| Timeline |
| IRB Brasil Resseguros |
| Itasa Investimentos |
IRB Brasil and Itasa Investimentos Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IRB Brasil and Itasa Investimentos
The main advantage of trading using opposite IRB Brasil and Itasa Investimentos positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IRB Brasil position performs unexpectedly, Itasa Investimentos 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 Itasa Investimentos will offset losses from the drop in Itasa Investimentos' long position.| IRB Brasil vs. Banco Bradesco SA | IRB Brasil vs. Petrleo Brasileiro SA | IRB Brasil vs. Ita Unibanco Holding | IRB Brasil vs. Itasa Investimentos |
| Itasa Investimentos vs. Banco do Brasil | Itasa Investimentos vs. Banco Bradesco SA | Itasa Investimentos vs. Ita Unibanco Holding | Itasa Investimentos vs. Petrleo Brasileiro 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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