Correlation Between Itaúsa - and Banco Alfa

Can any of the company-specific risk be diversified away by investing in both Itaúsa - and Banco Alfa 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 Itaúsa - and Banco Alfa into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Itasa Investimentos and Banco Alfa de, you can compare the effects of market volatilities on Itaúsa - and Banco Alfa 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 Itaúsa - with a short position of Banco Alfa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Itaúsa - and Banco Alfa.

Diversification Opportunities for Itaúsa - and Banco Alfa

0.42

Correlation Coefficient

Itaúsa -  Banco Alfa

Very weak diversification

The 3 months correlation between Itaúsa and Banco is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Itasa Investimentos and Banco Alfa de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Alfa de and Itaúsa - 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 Banco Alfa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Alfa de has no effect on the direction of Itaúsa - i.e., Itaúsa - and Banco Alfa go up and down completely randomly.

Pair Corralation between Itaúsa - and Banco Alfa

Assuming the 90 days trading horizon Itasa Investimentos is expected to under-perform the Banco Alfa. In addition to that, Itaúsa - is 2.01 times more volatile than Banco Alfa de. It trades about -0.17 of its total potential returns per unit of risk. Banco Alfa de is currently generating about -0.12 per unit of volatility. If you would invest  1,315  in Banco Alfa de on February 1, 2024 and sell it today you would lose (29.00) from holding Banco Alfa de or give up 2.21% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Itasa Investimentos  vs.  Banco Alfa de

Itasa Investimentos

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Itasa Investimentos are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Itaúsa - is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Banco Alfa de

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Alfa de are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Banco Alfa unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Itaúsa - and Banco Alfa

The main advantage of trading using opposite Itaúsa - and Banco Alfa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Itaúsa - position performs unexpectedly, Banco Alfa 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 Banco Alfa will offset losses from the drop in Banco Alfa's long position.

The idea behind Itasa Investimentos and Banco Alfa de pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .