Correlation Between Itau Unibanco and Intercorp Financial

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

Diversification Opportunities for Itau Unibanco and Intercorp Financial

-0.84

Correlation Coefficient

Itau Unibanco  Intercorp Financial

Pay attention - limited upside

The 3 months correlation between Itau and Intercorp is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Itau Unibanco Banco and Intercorp Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intercorp Financial 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 Intercorp Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intercorp Financial has no effect on the direction of Itau Unibanco i.e., Itau Unibanco and Intercorp Financial go up and down completely randomly.

Pair Corralation between Itau Unibanco and Intercorp Financial

Given the investment horizon of 90 days Itau Unibanco Banco is expected to under-perform the Intercorp Financial. In addition to that, Itau Unibanco is 1.87 times more volatile than Intercorp Financial Services. It trades about -0.26 of its total potential returns per unit of risk. Intercorp Financial Services is currently generating about 0.01 per unit of volatility. If you would invest  2,898  in Intercorp Financial Services on September 22, 2024 and sell it today you would earn a total of  6.00  from holding Intercorp Financial Services or generate 0.21% return on investment over 90 days.

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

Itau Unibanco Banco  vs.  Intercorp Financial Services

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.

Intercorp Financial

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Intercorp Financial Services are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical and fundamental indicators, Intercorp Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Itau Unibanco and Intercorp Financial

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

The idea behind Itau Unibanco Banco and Intercorp Financial Services 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.