Correlation Between Itasa Investimentos and Oi SA

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

By analyzing existing cross correlation between Itasa Investimentos and Oi SA, you can compare the effects of market volatilities on Itasa Investimentos and Oi SA 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 Oi SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Itasa Investimentos and Oi SA.

Diversification Opportunities for Itasa Investimentos and Oi SA

0.29

Correlation Coefficient

Itasa Investimentos  Oi SA

Modest diversification

The 3 months correlation between Itasa and OIBR4 is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Itasa Investimentos and Oi SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oi SA 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 Oi SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oi SA has no effect on the direction of Itasa Investimentos i.e., Itasa Investimentos and Oi SA go up and down completely randomly.

Pair Corralation between Itasa Investimentos and Oi SA

Assuming the 90 days trading horizon Itasa Investimentos is expected to under-perform the Oi SA. But the preferred stock apears to be less risky and, when comparing its historical volatility, Itasa Investimentos is 4.11 times less risky than Oi SA. The preferred stock trades about -0.16 of its potential returns per unit of risk. The Oi SA is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,200  in Oi SA on September 3, 2024 and sell it today you would lose (147.00) from holding Oi SA or give up 12.25% of portfolio value over 90 days.

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

Itasa Investimentos  vs.  Oi SA

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 latest weak performance, the Preferred Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Oi SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oi SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Preferred Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Itasa Investimentos and Oi SA

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

The idea behind Itasa Investimentos and Oi SA 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.