Correlation Between SK Telecom and Itau Unibanco

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

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

Diversification Opportunities for SK Telecom and Itau Unibanco

0.61

Correlation Coefficient

SK Telecom  Itau Unibanco

Poor diversification

The 3 months correlation between SKM and Itau is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding SK Telecom Co 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 SK Telecom 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 SK Telecom Co 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 SK Telecom i.e., SK Telecom and Itau Unibanco go up and down completely randomly.

Pair Corralation between SK Telecom and Itau Unibanco

Considering the 90-day investment horizon SK Telecom is expected to generate 2.19 times less return on investment than Itau Unibanco. But when comparing it to its historical volatility, SK Telecom Co is 1.49 times less risky than Itau Unibanco. It trades about 0.02 of its potential returns per unit of risk. Itau Unibanco Banco is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  432.00  in Itau Unibanco Banco on October 14, 2024 and sell it today you would earn a total of  72.00  from holding Itau Unibanco Banco or generate 16.67% return on investment over 90 days.

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

SK Telecom Co  vs.  Itau Unibanco Banco

SK Telecom

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SK Telecom Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's forward-looking signals 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 conflicting performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with SK Telecom and Itau Unibanco

The main advantage of trading using opposite SK Telecom and Itau Unibanco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SK Telecom 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 SK Telecom Co 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 Transaction History module to view history of all your transactions and understand their impact on performance.