Correlation Between Itau Unibanco and Summit Bancshares
Can any of the company-specific risk be diversified away by investing in both Itau Unibanco and Summit Bancshares 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 Summit Bancshares 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 Summit Bancshares, you can compare the effects of market volatilities on Itau Unibanco and Summit Bancshares 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 Summit Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Itau Unibanco and Summit Bancshares.
Diversification Opportunities for Itau Unibanco and Summit Bancshares
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Itau and Summit is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Itau Unibanco Banco and Summit Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Bancshares 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 Summit Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Bancshares has no effect on the direction of Itau Unibanco i.e., Itau Unibanco and Summit Bancshares go up and down completely randomly.
Pair Corralation between Itau Unibanco and Summit Bancshares
Given the investment horizon of 90 days Itau Unibanco Banco is expected to under-perform the Summit Bancshares. In addition to that, Itau Unibanco is 3.32 times more volatile than Summit Bancshares. It trades about -0.28 of its total potential returns per unit of risk. Summit Bancshares is currently generating about 0.06 per unit of volatility. If you would invest 4,371 in Summit Bancshares on September 25, 2024 and sell it today you would earn a total of 40.00 from holding Summit Bancshares or generate 0.92% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 95.24% |
Values | Daily Returns |
Itau Unibanco Banco vs. Summit Bancshares
Performance |
Timeline |
Itau Unibanco Banco |
Summit Bancshares |
Itau Unibanco and Summit Bancshares Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Itau Unibanco and Summit Bancshares
The main advantage of trading using opposite Itau Unibanco and Summit Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Itau Unibanco position performs unexpectedly, Summit Bancshares 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 Summit Bancshares will offset losses from the drop in Summit Bancshares' long position.The idea behind Itau Unibanco Banco and Summit Bancshares 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.Summit Bancshares vs. Banco Bradesco SA | Summit Bancshares vs. Itau Unibanco Banco | Summit Bancshares vs. Lloyds Banking Group | Summit Bancshares vs. Deutsche Bank AG |
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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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