Correlation Between Itau Unibanco and Davidstea

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

By analyzing existing cross correlation between Itau Unibanco Banco and Davidstea, you can compare the effects of market volatilities on Itau Unibanco and Davidstea 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 Itau Unibanco with a short position of Davidstea. Check out your portfolio center. Please also check ongoing floating volatility patterns of Itau Unibanco and Davidstea.

Diversification Opportunities for Itau Unibanco and Davidstea

-0.15

Correlation Coefficient

Itau Unibanco  Davidstea

Good diversification

The 3 months correlation between Itau and Davidstea is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Itau Unibanco Banco and Davidstea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Davidstea and Itau 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 Itau Unibanco Banco are associated (or correlated) with Davidstea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Davidstea has no effect on the direction of Itau Unibanco i.e., Itau Unibanco and Davidstea go up and down completely randomly.

Pair Corralation between Itau Unibanco and Davidstea

Given the investment horizon of 90 days Itau Unibanco Banco is expected to generate 0.34 times more return on investment than Davidstea. However, Itau Unibanco Banco is 2.95 times less risky than Davidstea. It trades about 0.06 of its potential returns per unit of risk. Davidstea is currently generating about -0.04 per unit of risk. If you would invest  372.00  in Itau Unibanco Banco on January 25, 2024 and sell it today you would earn a total of  249.00  from holding Itau Unibanco Banco or generate 66.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	53.95%
Values	Daily Returns

Itau Unibanco Banco  vs.  Davidstea

Itau Unibanco Banco

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Itau Unibanco Banco has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Itau Unibanco is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Davidstea

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Davidstea has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Davidstea is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Itau Unibanco and Davidstea

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

The idea behind Itau Unibanco Banco and Davidstea 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.

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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.