Correlation Between Truist Financial and Itau Unibanco

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

By analyzing existing cross correlation between Truist Financial Corp and Itau Unibanco Banco, you can compare the effects of market volatilities on Truist Financial and Itau Unibanco 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 Truist Financial with a short position of Itau Unibanco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Truist Financial and Itau Unibanco.

Diversification Opportunities for Truist Financial and Itau Unibanco

-0.59

Correlation Coefficient

Truist Financial  Itau Unibanco

Excellent diversification

The 3 months correlation between Truist and Itau is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Truist Financial Corp and Itau Unibanco Banco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Itau Unibanco Banco and Truist Financial 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 Truist Financial Corp are associated (or correlated) with Itau Unibanco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Itau Unibanco Banco has no effect on the direction of Truist Financial i.e., Truist Financial and Itau Unibanco go up and down completely randomly.

Pair Corralation between Truist Financial and Itau Unibanco

Considering the 90-day investment horizon Truist Financial Corp is expected to generate 0.6 times more return on investment than Itau Unibanco. However, Truist Financial Corp is 1.68 times less risky than Itau Unibanco. It trades about -0.19 of its potential returns per unit of risk. Itau Unibanco Banco is currently generating about -0.28 per unit of risk. If you would invest  4,618  in Truist Financial Corp on September 21, 2024 and sell it today you would lose (286.00) from holding Truist Financial Corp or give up 6.19% of portfolio value over 90 days.

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

Truist Financial Corp  vs.  Itau Unibanco Banco

Truist Financial Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Truist Financial Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Truist Financial is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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.

Pair Trading with Truist Financial and Itau Unibanco

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

The idea behind Truist Financial Corp and Itau Unibanco Banco 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.