Correlation Between Itau Unibanco and Open Lending

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

Diversification Opportunities for Itau Unibanco and Open Lending

-0.21

Correlation Coefficient

Itau Unibanco  Open Lending

Very good diversification

The 3 months correlation between Itau and Open is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Itau Unibanco Banco and Open Lending Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Open Lending Corp 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 Open Lending. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Open Lending Corp has no effect on the direction of Itau Unibanco i.e., Itau Unibanco and Open Lending go up and down completely randomly.

Pair Corralation between Itau Unibanco and Open Lending

Given the investment horizon of 90 days Itau Unibanco Banco is expected to under-perform the Open Lending. But the stock apears to be less risky and, when comparing its historical volatility, Itau Unibanco Banco is 1.84 times less risky than Open Lending. The stock trades about -0.2 of its potential returns per unit of risk. The Open Lending Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  585.00  in Open Lending Corp on September 17, 2024 and sell it today you would lose (11.00) from holding Open Lending Corp or give up 1.88% of portfolio value over 90 days.

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

Itau Unibanco Banco  vs.  Open Lending Corp

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.

Open Lending Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Open Lending Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Open Lending is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Itau Unibanco and Open Lending

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

The idea behind Itau Unibanco Banco and Open Lending Corp 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.