Correlation Between Itau Unibanco and KB Financial

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

Diversification Opportunities for Itau Unibanco and KB Financial

-0.41

Correlation Coefficient

Itau Unibanco  KB Financial

Very good diversification

The 3 months correlation between Itau and KB Financial is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Itau Unibanco Banco and KB Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KB Financial Group 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 KB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KB Financial Group has no effect on the direction of Itau Unibanco i.e., Itau Unibanco and KB Financial go up and down completely randomly.

Pair Corralation between Itau Unibanco and KB Financial

Given the investment horizon of 90 days Itau Unibanco Banco is expected to generate 1.16 times more return on investment than KB Financial. However, Itau Unibanco is 1.16 times more volatile than KB Financial Group. It trades about 0.28 of its potential returns per unit of risk. KB Financial Group is currently generating about -0.06 per unit of risk. If you would invest  474.00  in Itau Unibanco Banco on December 19, 2024 and sell it today you would earn a total of  154.00  from holding Itau Unibanco Banco or generate 32.49% return on investment over 90 days.

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

Itau Unibanco Banco  vs.  KB Financial Group

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 22 (%) 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.

KB Financial Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days KB Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, KB Financial is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Itau Unibanco and KB Financial

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

The idea behind Itau Unibanco Banco and KB Financial Group 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.