Correlation Between Itau Unibanco and Grupo Financiero

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

Diversification Opportunities for Itau Unibanco and Grupo Financiero

-0.68

Correlation Coefficient

Itau Unibanco  Grupo Financiero

Excellent diversification

The 3 months correlation between Itau and Grupo is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Itau Unibanco Banco and Grupo Financiero Galicia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Financiero Galicia 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 Grupo Financiero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Financiero Galicia has no effect on the direction of Itau Unibanco i.e., Itau Unibanco and Grupo Financiero go up and down completely randomly.

Pair Corralation between Itau Unibanco and Grupo Financiero

Given the investment horizon of 90 days Itau Unibanco Banco is expected to generate 0.5 times more return on investment than Grupo Financiero. However, Itau Unibanco Banco is 1.98 times less risky than Grupo Financiero. It trades about 0.27 of its potential returns per unit of risk. Grupo Financiero Galicia is currently generating about -0.02 per unit of risk. If you would invest  426.00  in Itau Unibanco Banco on December 28, 2024 and sell it today you would earn a total of  134.00  from holding Itau Unibanco Banco or generate 31.46% return on investment over 90 days.

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

Itau Unibanco Banco  vs.  Grupo Financiero Galicia

Itau Unibanco Banco

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Itau Unibanco Banco are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Itau Unibanco sustained solid returns over the last few months and may actually be approaching a breakup point.

Grupo Financiero Galicia

Risk-Adjusted Performance

Very Weak

Over the last 90 days Grupo Financiero Galicia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Grupo Financiero is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Itau Unibanco and Grupo Financiero

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

The idea behind Itau Unibanco Banco and Grupo Financiero Galicia 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.