Correlation Between Itau Unibanco and Microsoft

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

Diversification Opportunities for Itau Unibanco and Microsoft

0.31
  Correlation Coefficient

Weak diversification

The 3 months correlation between Itau and Microsoft is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Itau Unibanco Banco and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft 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 Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of Itau Unibanco i.e., Itau Unibanco and Microsoft go up and down completely randomly.

Pair Corralation between Itau Unibanco and Microsoft

Given the investment horizon of 90 days Itau Unibanco Banco is expected to under-perform the Microsoft. But the stock apears to be less risky and, when comparing its historical volatility, Itau Unibanco Banco is 1.21 times less risky than Microsoft. The stock trades about -0.04 of its potential returns per unit of risk. The Microsoft is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  37,565  in Microsoft on December 30, 2023 and sell it today you would earn a total of  1,380  from holding Microsoft or generate 3.67% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Itau Unibanco Banco  vs.  Microsoft

 Performance 
       Timeline  
Itau Unibanco Banco 

Risk-Adjusted Performance

4 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Itau Unibanco Banco are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Itau Unibanco is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.
Microsoft 

Risk-Adjusted Performance

14 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Microsoft reported solid returns over the last few months and may actually be approaching a breakup point.

Itau Unibanco and Microsoft Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Itau Unibanco and Microsoft

The main advantage of trading using opposite Itau Unibanco and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Itau Unibanco position performs unexpectedly, Microsoft 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 Microsoft will offset losses from the drop in Microsoft's long position.
The idea behind Itau Unibanco Banco and Microsoft 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.
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..

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