Correlation Between Ita Unibanco and GAEC Educacao

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

Diversification Opportunities for Ita Unibanco and GAEC Educacao

0.78

Correlation Coefficient

Ita Unibanco  GAEC Educacao

Poor diversification

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

Pair Corralation between Ita Unibanco and GAEC Educacao

Assuming the 90 days trading horizon Ita Unibanco is expected to generate 3.25 times less return on investment than GAEC Educacao. But when comparing it to its historical volatility, Ita Unibanco Holding is 3.25 times less risky than GAEC Educacao. It trades about 0.2 of its potential returns per unit of risk. GAEC Educacao SA is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  342.00  in GAEC Educacao SA on February 21, 2024 and sell it today you would earn a total of  56.00  from holding GAEC Educacao SA or generate 16.37% return on investment over 90 days.

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

Ita Unibanco Holding  vs.  GAEC Educacao SA

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 comparatively stable basic indicators, Ita Unibanco is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

GAEC Educacao SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GAEC Educacao SA 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.

Pair Trading with Ita Unibanco and GAEC Educacao

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

The idea behind Ita Unibanco Holding and GAEC Educacao SA 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.