Correlation Between Itau Unibanco and KeyCorp

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

Diversification Opportunities for Itau Unibanco and KeyCorp

-0.17
  Correlation Coefficient

Good diversification

The 3 months correlation between Itau and KeyCorp is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Itau Unibanco Banco and KeyCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KeyCorp 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 KeyCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KeyCorp has no effect on the direction of Itau Unibanco i.e., Itau Unibanco and KeyCorp go up and down completely randomly.

Pair Corralation between Itau Unibanco and KeyCorp

Given the investment horizon of 90 days Itau Unibanco Banco is expected to under-perform the KeyCorp. In addition to that, Itau Unibanco is 2.8 times more volatile than KeyCorp. It trades about -0.23 of its total potential returns per unit of risk. KeyCorp is currently generating about -0.03 per unit of volatility. If you would invest  2,512  in KeyCorp on August 28, 2024 and sell it today you would lose (8.00) from holding KeyCorp or give up 0.32% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Itau Unibanco Banco  vs.  KeyCorp

 Performance 
       Timeline  
Itau Unibanco Banco 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.
KeyCorp 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in KeyCorp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, KeyCorp is not utilizing all of its potentials. The new stock price confusion, may contribute to short-horizon losses for the traders.

Itau Unibanco and KeyCorp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Itau Unibanco and KeyCorp

The main advantage of trading using opposite Itau Unibanco and KeyCorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Itau Unibanco position performs unexpectedly, KeyCorp 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 KeyCorp will offset losses from the drop in KeyCorp's long position.
The idea behind Itau Unibanco Banco and KeyCorp 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.

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