Correlation Between Itasa Investimentos and Banco Do

Can any of the company-specific risk be diversified away by investing in both Itasa Investimentos and Banco Do 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 Itasa Investimentos and Banco Do 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 do Estado, you can compare the effects of market volatilities on Itasa Investimentos and Banco Do 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 Itasa Investimentos with a short position of Banco Do. Check out your portfolio center. Please also check ongoing floating volatility patterns of Itasa Investimentos and Banco Do.

Diversification Opportunities for Itasa Investimentos and Banco Do

0.77

Correlation Coefficient

Itasa Investimentos  Banco Do

Poor diversification

The 3 months correlation between Itasa and Banco is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Itasa Investimentos and Banco do Estado in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco do Estado and Itasa Investimentos 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 Do. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco do Estado has no effect on the direction of Itasa Investimentos i.e., Itasa Investimentos and Banco Do go up and down completely randomly.

Pair Corralation between Itasa Investimentos and Banco Do

Assuming the 90 days trading horizon Itasa Investimentos is expected to under-perform the Banco Do. In addition to that, Itasa Investimentos is 1.12 times more volatile than Banco do Estado. It trades about -0.17 of its total potential returns per unit of risk. Banco do Estado is currently generating about -0.19 per unit of volatility. If you would invest  1,244  in Banco do Estado on September 4, 2024 and sell it today you would lose (156.00) from holding Banco do Estado or give up 12.54% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Itasa Investimentos  vs.  Banco do Estado

Itasa Investimentos

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Itasa Investimentos has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Banco do Estado

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banco do Estado has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Preferred Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Itasa Investimentos and Banco Do

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

The idea behind Itasa Investimentos and Banco do Estado 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.