Correlation Between COMBA TELECOM and UNICREDIT SPA

Can any of the company-specific risk be diversified away by investing in both COMBA TELECOM 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 COMBA TELECOM and UNICREDIT SPA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between COMBA TELECOM SYST and UNICREDIT SPA ADR, you can compare the effects of market volatilities on COMBA TELECOM 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 COMBA TELECOM with a short position of UNICREDIT SPA. Check out your portfolio center. Please also check ongoing floating volatility patterns of COMBA TELECOM and UNICREDIT SPA.

Diversification Opportunities for COMBA TELECOM and UNICREDIT SPA

0.05

Correlation Coefficient

COMBA TELECOM  UNICREDIT SPA

Significant diversification

The 3 months correlation between COMBA and UNICREDIT is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding COMBA TELECOM SYST 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 COMBA 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 COMBA TELECOM SYST 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 COMBA TELECOM i.e., COMBA TELECOM and UNICREDIT SPA go up and down completely randomly.

Pair Corralation between COMBA TELECOM and UNICREDIT SPA

Assuming the 90 days trading horizon COMBA TELECOM SYST is expected to under-perform the UNICREDIT SPA. But the stock apears to be less risky and, when comparing its historical volatility, COMBA TELECOM SYST is 1.11 times less risky than UNICREDIT SPA. The stock trades about -0.07 of its potential returns per unit of risk. The UNICREDIT SPA ADR is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,754  in UNICREDIT SPA ADR on September 12, 2024 and sell it today you would earn a total of  156.00  from holding UNICREDIT SPA ADR or generate 8.89% return on investment over 90 days.

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

COMBA TELECOM SYST  vs.  UNICREDIT SPA ADR

COMBA TELECOM SYST

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days COMBA TELECOM SYST has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

UNICREDIT SPA ADR

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in UNICREDIT SPA ADR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, UNICREDIT SPA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with COMBA TELECOM and UNICREDIT SPA

The main advantage of trading using opposite COMBA TELECOM and UNICREDIT SPA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COMBA TELECOM 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 COMBA TELECOM SYST 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.