Correlation Between Itau Unibanco and Tennessee Valley

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

Diversification Opportunities for Itau Unibanco and Tennessee Valley

-0.13

Correlation Coefficient

Itau Unibanco  Tennessee Valley

Good diversification

The 3 months correlation between Itau and Tennessee is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Itau Unibanco Banco and Tennessee Valley Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tennessee Valley Fin 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 Tennessee Valley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tennessee Valley Fin has no effect on the direction of Itau Unibanco i.e., Itau Unibanco and Tennessee Valley go up and down completely randomly.

Pair Corralation between Itau Unibanco and Tennessee Valley

Given the investment horizon of 90 days Itau Unibanco Banco is expected to under-perform the Tennessee Valley. But the stock apears to be less risky and, when comparing its historical volatility, Itau Unibanco Banco is 1.03 times less risky than Tennessee Valley. The stock trades about -0.23 of its potential returns per unit of risk. The Tennessee Valley Financial is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  704.00  in Tennessee Valley Financial on September 25, 2024 and sell it today you would earn a total of  8.00  from holding Tennessee Valley Financial or generate 1.14% return on investment over 90 days.

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

Itau Unibanco Banco  vs.  Tennessee Valley Financial

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 weak 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.

Tennessee Valley Fin

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tennessee Valley Financial are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, Tennessee Valley is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Itau Unibanco and Tennessee Valley

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

The idea behind Itau Unibanco Banco and Tennessee Valley Financial 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.