Correlation Between ICICI Bank and Itau Unibanco

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

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

Diversification Opportunities for ICICI Bank and Itau Unibanco

0.15

Correlation Coefficient

ICICI Bank  Itau Unibanco

Average diversification

The 3 months correlation between ICICI and Itau is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding ICICI Bank Limited 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 ICICI Bank 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 ICICI Bank Limited 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 ICICI Bank i.e., ICICI Bank and Itau Unibanco go up and down completely randomly.

Pair Corralation between ICICI Bank and Itau Unibanco

Considering the 90-day investment horizon ICICI Bank Limited is expected to under-perform the Itau Unibanco. But the stock apears to be less risky and, when comparing its historical volatility, ICICI Bank Limited is 1.65 times less risky than Itau Unibanco. The stock trades about -0.43 of its potential returns per unit of risk. The Itau Unibanco Banco is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  500.00  in Itau Unibanco Banco on October 27, 2024 and sell it today you would earn a total of  46.00  from holding Itau Unibanco Banco or generate 9.2% return on investment over 90 days.

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

ICICI Bank Limited  vs.  Itau Unibanco Banco

ICICI Bank Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ICICI Bank Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's fundamental drivers remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

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 latest conflicting performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with ICICI Bank and Itau Unibanco

The main advantage of trading using opposite ICICI Bank and Itau Unibanco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ICICI Bank 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 ICICI Bank Limited 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.