Correlation Between Citigroup and Itau Unibanco

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

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

Diversification Opportunities for Citigroup and Itau Unibanco

-0.87

Correlation Coefficient

Citigroup  Itau Unibanco

Pay attention - limited upside

The 3 months correlation between Citigroup and Itau is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup 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 Citigroup 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 Citigroup 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 Citigroup i.e., Citigroup and Itau Unibanco go up and down completely randomly.

Pair Corralation between Citigroup and Itau Unibanco

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.93 times more return on investment than Itau Unibanco. However, Citigroup is 1.08 times less risky than Itau Unibanco. It trades about 0.1 of its potential returns per unit of risk. Itau Unibanco Banco is currently generating about 0.01 per unit of risk. If you would invest  4,460  in Citigroup on September 12, 2024 and sell it today you would earn a total of  2,790  from holding Citigroup or generate 62.56% return on investment over 90 days.

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

Citigroup  vs.  Itau Unibanco Banco

Citigroup

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 unfluctuating 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 Citigroup and Itau Unibanco

The main advantage of trading using opposite Citigroup and Itau Unibanco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup 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 Citigroup 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.

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.