Correlation Between Ita Unibanco and Vale SA

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

Diversification Opportunities for Ita Unibanco and Vale SA

-0.08

Correlation Coefficient

Ita Unibanco  Vale SA

Good diversification

The 3 months correlation between Ita and Vale is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Ita Unibanco Holding and Vale SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vale 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 Vale SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vale SA has no effect on the direction of Ita Unibanco i.e., Ita Unibanco and Vale SA go up and down completely randomly.

Pair Corralation between Ita Unibanco and Vale SA

Assuming the 90 days trading horizon Ita Unibanco is expected to generate 2.49 times less return on investment than Vale SA. But when comparing it to its historical volatility, Ita Unibanco Holding is 1.08 times less risky than Vale SA. It trades about 0.03 of its potential returns per unit of risk. Vale SA is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  5,385  in Vale SA on April 25, 2025 and sell it today you would earn a total of  357.00  from holding Vale SA or generate 6.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Ita Unibanco Holding  vs.  Vale SA

Ita Unibanco Holding

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ita Unibanco Holding are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Vale SA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vale SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Vale SA may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Ita Unibanco and Vale SA

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

The idea behind Ita Unibanco Holding and Vale 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.