Correlation Between Ita Unibanco and Merck
Can any of the company-specific risk be diversified away by investing in both Ita Unibanco and Merck 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 Ita Unibanco and Merck into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ita Unibanco Holding and Merck Co, you can compare the effects of market volatilities on Ita Unibanco and Merck 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 Ita Unibanco with a short position of Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ita Unibanco and Merck.
Diversification Opportunities for Ita Unibanco and Merck
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ita and Merck is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Ita Unibanco Holding and Merck Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck and Ita Unibanco 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 Ita Unibanco Holding are associated (or correlated) with Merck. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merck has no effect on the direction of Ita Unibanco i.e., Ita Unibanco and Merck go up and down completely randomly.
Pair Corralation between Ita Unibanco and Merck
Assuming the 90 days trading horizon Ita Unibanco Holding is expected to under-perform the Merck. But the stock apears to be less risky and, when comparing its historical volatility, Ita Unibanco Holding is 1.49 times less risky than Merck. The stock trades about -0.17 of its potential returns per unit of risk. The Merck Co is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest 7,596 in Merck Co on August 28, 2024 and sell it today you would lose (214.00) from holding Merck Co or give up 2.82% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ita Unibanco Holding vs. Merck Co
Performance |
| Timeline |
| Ita Unibanco Holding |
| Merck |
Ita Unibanco and Merck Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ita Unibanco and Merck
The main advantage of trading using opposite Ita Unibanco and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ita Unibanco position performs unexpectedly, Merck 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 Merck will offset losses from the drop in Merck's long position.| Ita Unibanco vs. Fras le SA | Ita Unibanco vs. Clave Indices De | Ita Unibanco vs. BTG Pactual Logstica | Ita Unibanco vs. Telefonaktiebolaget LM Ericsson |
| Merck vs. Energisa SA | Merck vs. BTG Pactual Logstica | Merck vs. Plano Plano Desenvolvimento | Merck vs. Companhia Habitasul de |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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