Correlation Between UNICREDIT SPA and Oversea Chinese

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

By analyzing existing cross correlation between UNICREDIT SPA ADR and Oversea Chinese Banking, you can compare the effects of market volatilities on UNICREDIT SPA and Oversea Chinese 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 Oversea Chinese. Check out your portfolio center. Please also check ongoing floating volatility patterns of UNICREDIT SPA and Oversea Chinese.

Diversification Opportunities for UNICREDIT SPA and Oversea Chinese

-0.03

Correlation Coefficient

UNICREDIT SPA  Oversea Chinese

Good diversification

The 3 months correlation between UNICREDIT and Oversea is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding UNICREDIT SPA ADR and Oversea Chinese Banking in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oversea Chinese Banking 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 ADR are associated (or correlated) with Oversea Chinese. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oversea Chinese Banking has no effect on the direction of UNICREDIT SPA i.e., UNICREDIT SPA and Oversea Chinese go up and down completely randomly.

Pair Corralation between UNICREDIT SPA and Oversea Chinese

Assuming the 90 days trading horizon UNICREDIT SPA ADR is expected to generate 1.57 times more return on investment than Oversea Chinese. However, UNICREDIT SPA is 1.57 times more volatile than Oversea Chinese Banking. It trades about 0.31 of its potential returns per unit of risk. Oversea Chinese Banking is currently generating about 0.02 per unit of risk. If you would invest  1,890  in UNICREDIT SPA ADR on December 26, 2024 and sell it today you would earn a total of  790.00  from holding UNICREDIT SPA ADR or generate 41.8% return on investment over 90 days.

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

UNICREDIT SPA ADR  vs.  Oversea Chinese Banking

UNICREDIT SPA ADR

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in UNICREDIT SPA ADR are ranked lower than 24 (%) 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.

Oversea Chinese Banking

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Oversea Chinese Banking are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental drivers, Oversea Chinese 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 Oversea Chinese

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

The idea behind UNICREDIT SPA ADR and Oversea Chinese Banking 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.