Correlation Between Affinity Bancshares and Itau Unibanco

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

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

Diversification Opportunities for Affinity Bancshares and Itau Unibanco

-0.28

Correlation Coefficient

Affinity Bancshares  Itau Unibanco

Very good diversification

The 3 months correlation between Affinity and Itau is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Affinity Bancshares and Itau Unibanco Banco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Itau Unibanco Banco and Affinity Bancshares 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 Affinity Bancshares are associated (or correlated) with Itau Unibanco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Itau Unibanco Banco has no effect on the direction of Affinity Bancshares i.e., Affinity Bancshares and Itau Unibanco go up and down completely randomly.

Pair Corralation between Affinity Bancshares and Itau Unibanco

Given the investment horizon of 90 days Affinity Bancshares is expected to generate 1.05 times more return on investment than Itau Unibanco. However, Affinity Bancshares is 1.05 times more volatile than Itau Unibanco Banco. It trades about 0.09 of its potential returns per unit of risk. Itau Unibanco Banco is currently generating about -0.02 per unit of risk. If you would invest  1,525  in Affinity Bancshares on September 13, 2024 and sell it today you would earn a total of  643.00  from holding Affinity Bancshares or generate 42.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.19%
Values	Daily Returns

Affinity Bancshares  vs.  Itau Unibanco Banco

Affinity Bancshares

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Affinity Bancshares are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental drivers, Affinity Bancshares is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

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 conflicting performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Affinity Bancshares and Itau Unibanco

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

The idea behind Affinity Bancshares and Itau Unibanco Banco 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.