Correlation Between Ita Unibanco and Rumo SA
Can any of the company-specific risk be diversified away by investing in both Ita Unibanco and Rumo SA 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 Rumo SA 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 Rumo SA, you can compare the effects of market volatilities on Ita Unibanco and Rumo SA 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 Rumo SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ita Unibanco and Rumo SA.
Diversification Opportunities for Ita Unibanco and Rumo SA
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ita and Rumo is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Ita Unibanco Holding and Rumo SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rumo SA 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 Rumo SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rumo SA has no effect on the direction of Ita Unibanco i.e., Ita Unibanco and Rumo SA go up and down completely randomly.
Pair Corralation between Ita Unibanco and Rumo SA
Assuming the 90 days trading horizon Ita Unibanco Holding is expected to generate 0.69 times more return on investment than Rumo SA. However, Ita Unibanco Holding is 1.44 times less risky than Rumo SA. It trades about 0.08 of its potential returns per unit of risk. Rumo SA is currently generating about -0.02 per unit of risk. If you would invest 2,129 in Ita Unibanco Holding on August 31, 2024 and sell it today you would earn a total of 723.00 from holding Ita Unibanco Holding or generate 33.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.2% |
| Values | Daily Returns |
Ita Unibanco Holding vs. Rumo SA
Performance |
| Timeline |
| Ita Unibanco Holding |
| Rumo SA |
Ita Unibanco and Rumo SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ita Unibanco and Rumo SA
The main advantage of trading using opposite Ita Unibanco and Rumo SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ita Unibanco position performs unexpectedly, Rumo SA 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 Rumo SA will offset losses from the drop in Rumo SA's long position.| Ita Unibanco vs. Ita Unibanco Holding | Ita Unibanco vs. Banco Santander SA | Ita Unibanco vs. Itasa Investimentos |
| Rumo SA vs. METISA Metalrgica Timboense | Rumo SA vs. Lupatech SA | Rumo SA vs. Fras le SA | Rumo SA vs. Energisa 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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