Correlation Between Ita Unibanco and EOG Resources

Can any of the company-specific risk be diversified away by investing in both Ita Unibanco and EOG Resources 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 Ita Unibanco and EOG Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ita Unibanco Holding and EOG Resources, you can compare the effects of market volatilities on Ita Unibanco and EOG Resources 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 Ita Unibanco with a short position of EOG Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ita Unibanco and EOG Resources.

Diversification Opportunities for Ita Unibanco and EOG Resources

-0.79

Correlation Coefficient

Ita Unibanco  EOG Resources

Pay attention - limited upside

The 3 months correlation between Ita and EOG is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Ita Unibanco Holding and EOG Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EOG Resources and Ita 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 Ita Unibanco Holding are associated (or correlated) with EOG Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EOG Resources has no effect on the direction of Ita Unibanco i.e., Ita Unibanco and EOG Resources go up and down completely randomly.

Pair Corralation between Ita Unibanco and EOG Resources

Assuming the 90 days trading horizon Ita Unibanco Holding is expected to under-perform the EOG Resources. In addition to that, Ita Unibanco is 2.78 times more volatile than EOG Resources. It trades about -0.17 of its total potential returns per unit of risk. EOG Resources is currently generating about -0.41 per unit of volatility. If you would invest  39,780  in EOG Resources on September 23, 2024 and sell it today you would lose (1,894) from holding EOG Resources or give up 4.76% of portfolio value over 90 days.

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

Ita Unibanco Holding  vs.  EOG Resources

Ita Unibanco Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ita Unibanco Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

EOG Resources

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EOG Resources are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, EOG Resources may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ita Unibanco and EOG Resources

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

The idea behind Ita Unibanco Holding and EOG Resources 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.