Correlation Between Itau Unibanco and MT Bank

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

Diversification Opportunities for Itau Unibanco and MT Bank

-0.88

Correlation Coefficient

Itau Unibanco  MT Bank

Pay attention - limited upside

The 3 months correlation between Itau and MTB is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Itau Unibanco Banco and MT Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MT Bank 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 MT Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MT Bank has no effect on the direction of Itau Unibanco i.e., Itau Unibanco and MT Bank go up and down completely randomly.

Pair Corralation between Itau Unibanco and MT Bank

Given the investment horizon of 90 days Itau Unibanco Banco is expected to under-perform the MT Bank. But the stock apears to be less risky and, when comparing its historical volatility, Itau Unibanco Banco is 1.33 times less risky than MT Bank. The stock trades about -0.21 of its potential returns per unit of risk. The MT Bank is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  19,225  in MT Bank on September 2, 2024 and sell it today you would earn a total of  2,774  from holding MT Bank or generate 14.43% return on investment over 90 days.

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

Itau Unibanco Banco  vs.  MT Bank

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.

MT Bank

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MT Bank are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, MT Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Itau Unibanco and MT Bank

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

The idea behind Itau Unibanco Banco and MT Bank 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.