Correlation Between Enter Air and UniCredit SpA

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

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

Diversification Opportunities for Enter Air and UniCredit SpA

0.09

Correlation Coefficient

Enter Air  UniCredit SpA

Significant diversification

The 3 months correlation between Enter and UniCredit is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Enter Air SA and UniCredit SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UniCredit SpA and Enter Air 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 Enter Air SA 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 has no effect on the direction of Enter Air i.e., Enter Air and UniCredit SpA go up and down completely randomly.

Pair Corralation between Enter Air and UniCredit SpA

Assuming the 90 days trading horizon Enter Air SA is expected to under-perform the UniCredit SpA. But the stock apears to be less risky and, when comparing its historical volatility, Enter Air SA is 1.18 times less risky than UniCredit SpA. The stock trades about -0.02 of its potential returns per unit of risk. The UniCredit SpA is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  15,662  in UniCredit SpA on December 3, 2024 and sell it today you would earn a total of  5,398  from holding UniCredit SpA or generate 34.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Enter Air SA  vs.  UniCredit SpA

Enter Air SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Enter Air SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Enter Air is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

UniCredit SpA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in UniCredit SpA are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, UniCredit SpA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enter Air and UniCredit SpA

The main advantage of trading using opposite Enter Air and UniCredit SpA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enter Air 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 Enter Air SA and UniCredit SpA 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.