Correlation Between Itau Unibanco and National Bank

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

Diversification Opportunities for Itau Unibanco and National Bank

0.78

Correlation Coefficient

Itau Unibanco  National Bank

Poor diversification

The 3 months correlation between Itau and National is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Itau Unibanco Banco and National Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National 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 National Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bank has no effect on the direction of Itau Unibanco i.e., Itau Unibanco and National Bank go up and down completely randomly.

Pair Corralation between Itau Unibanco and National Bank

Given the investment horizon of 90 days Itau Unibanco Banco is expected to generate 0.73 times more return on investment than National Bank. However, Itau Unibanco Banco is 1.37 times less risky than National Bank. It trades about -0.17 of its potential returns per unit of risk. National Bank of is currently generating about -0.13 per unit of risk. If you would invest  649.00  in Itau Unibanco Banco on September 3, 2024 and sell it today you would lose (113.00) from holding Itau Unibanco Banco or give up 17.41% 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.  National Bank of

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.

National Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Bank of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators 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 National Bank

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

The idea behind Itau Unibanco Banco and National Bank of 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.