Correlation Between Itasa Investimentos and IRB Brasil
Can any of the company-specific risk be diversified away by investing in both Itasa Investimentos and IRB Brasil 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 Itasa Investimentos and IRB Brasil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Itasa Investimentos and IRB Brasil Resseguros SA, you can compare the effects of market volatilities on Itasa Investimentos and IRB Brasil 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 Itasa Investimentos with a short position of IRB Brasil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Itasa Investimentos and IRB Brasil.
Diversification Opportunities for Itasa Investimentos and IRB Brasil
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Itasa and IRB is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Itasa Investimentos and IRB Brasil Resseguros SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IRB Brasil Resseguros and Itasa Investimentos 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 Itasa Investimentos are associated (or correlated) with IRB Brasil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IRB Brasil Resseguros has no effect on the direction of Itasa Investimentos i.e., Itasa Investimentos and IRB Brasil go up and down completely randomly.
Pair Corralation between Itasa Investimentos and IRB Brasil
Assuming the 90 days trading horizon Itasa Investimentos is expected to under-perform the IRB Brasil. But the preferred stock apears to be less risky and, when comparing its historical volatility, Itasa Investimentos is 1.61 times less risky than IRB Brasil. The preferred stock trades about -0.22 of its potential returns per unit of risk. The IRB Brasil Resseguros SA is currently generating about -0.02 of returns per unit of risk over similar time horizon. 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 |
Itasa Investimentos vs. IRB Brasil Resseguros SA
Performance |
| Timeline |
| Itasa Investimentos |
| IRB Brasil Resseguros |
Itasa Investimentos and IRB Brasil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Itasa Investimentos and IRB Brasil
The main advantage of trading using opposite Itasa Investimentos and IRB Brasil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Itasa Investimentos position performs unexpectedly, IRB Brasil 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 IRB Brasil will offset losses from the drop in IRB Brasil's long position.| Itasa Investimentos vs. Banco do Brasil | Itasa Investimentos vs. Banco Bradesco SA | Itasa Investimentos vs. Ita Unibanco Holding | Itasa Investimentos vs. Petrleo Brasileiro SA |
| IRB Brasil vs. Banco Bradesco SA | IRB Brasil vs. Petrleo Brasileiro SA | IRB Brasil vs. Ita Unibanco Holding | IRB Brasil vs. Itasa Investimentos |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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