Correlation Between Banco Santander and UniCredit SpA

Can any of the company-specific risk be diversified away by investing in both Banco Santander and UniCredit SpA 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 Banco Santander and UniCredit SpA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Banco Santander Brasil and UniCredit SpA ADR, you can compare the effects of market volatilities on Banco Santander and UniCredit SpA 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 Banco Santander with a short position of UniCredit SpA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Santander and UniCredit SpA.

Diversification Opportunities for Banco Santander and UniCredit SpA

0.55

Correlation Coefficient

Banco Santander  UniCredit SpA

Very weak diversification

The 3 months correlation between Banco and UniCredit is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Banco Santander Brasil and UniCredit SpA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UniCredit SpA ADR and Banco Santander 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 Banco Santander Brasil are associated (or correlated) with UniCredit SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UniCredit SpA ADR has no effect on the direction of Banco Santander i.e., Banco Santander and UniCredit SpA go up and down completely randomly.

Pair Corralation between Banco Santander and UniCredit SpA

Given the investment horizon of 90 days Banco Santander Brasil is expected to under-perform the UniCredit SpA. In addition to that, Banco Santander is 1.25 times more volatile than UniCredit SpA ADR. It trades about -0.24 of its total potential returns per unit of risk. UniCredit SpA ADR is currently generating about -0.09 per unit of volatility. If you would invest  2,150  in UniCredit SpA ADR on September 27, 2024 and sell it today you would lose (165.00) from holding UniCredit SpA ADR or give up 7.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.67%
Values	Daily Returns

Banco Santander Brasil  vs.  UniCredit SpA ADR

Banco Santander Brasil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banco Santander Brasil has generated negative risk-adjusted returns adding no value to investors with long positions. Even with inconsistent performance in the last few months, the Stock's fundamental drivers remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

UniCredit SpA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UniCredit SpA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Banco Santander and UniCredit SpA

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

The idea behind Banco Santander Brasil and UniCredit SpA ADR 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.