Correlation Between UniCredit SpA and AUTO TRADER

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

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

Diversification Opportunities for UniCredit SpA and AUTO TRADER

-0.17

Correlation Coefficient

UniCredit SpA  AUTO TRADER

Good diversification

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

Pair Corralation between UniCredit SpA and AUTO TRADER

Assuming the 90 days trading horizon UniCredit SpA is expected to generate 1.32 times more return on investment than AUTO TRADER. However, UniCredit SpA is 1.32 times more volatile than AUTO TRADER ADR. It trades about 0.3 of its potential returns per unit of risk. AUTO TRADER ADR is currently generating about -0.06 per unit of risk. If you would invest  3,774  in UniCredit SpA on December 23, 2024 and sell it today you would earn a total of  1,541  from holding UniCredit SpA or generate 40.83% return on investment over 90 days.

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

UniCredit SpA  vs.  AUTO TRADER ADR

UniCredit SpA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in UniCredit SpA are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain forward indicators, UniCredit SpA reported solid returns over the last few months and may actually be approaching a breakup point.

AUTO TRADER ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days AUTO TRADER ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, AUTO TRADER is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with UniCredit SpA and AUTO TRADER

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

The idea behind UniCredit SpA and AUTO TRADER 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.