Correlation Between Itau Unibanco and PT Bank

Can any of the company-specific risk be diversified away by investing in both Itau Unibanco and PT Bank 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 PT Bank 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 PT Bank Rakyat, you can compare the effects of market volatilities on Itau Unibanco and PT Bank 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 PT Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Itau Unibanco and PT Bank.

Diversification Opportunities for Itau Unibanco and PT Bank

0.71

Correlation Coefficient

Itau Unibanco  PT Bank

Poor diversification

The 3 months correlation between Itau and BKRKF is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Itau Unibanco Banco and PT Bank Rakyat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Bank Rakyat 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 PT Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Bank Rakyat has no effect on the direction of Itau Unibanco i.e., Itau Unibanco and PT Bank go up and down completely randomly.

Pair Corralation between Itau Unibanco and PT Bank

Given the investment horizon of 90 days Itau Unibanco Banco is expected to generate 0.28 times more return on investment than PT Bank. However, Itau Unibanco Banco is 3.56 times less risky than PT Bank. It trades about -0.19 of its potential returns per unit of risk. PT Bank Rakyat is currently generating about -0.06 per unit of risk. If you would invest  648.00  in Itau Unibanco Banco on September 23, 2024 and sell it today you would lose (141.00) from holding Itau Unibanco Banco or give up 21.76% of portfolio value over 90 days.

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

Itau Unibanco Banco  vs.  PT Bank Rakyat

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 fragile 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.

PT Bank Rakyat

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Bank Rakyat has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's forward-looking signals remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Itau Unibanco and PT Bank

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

The idea behind Itau Unibanco Banco and PT Bank Rakyat 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.