Correlation Between Ferro SA and UniCredit SpA

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

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

Diversification Opportunities for Ferro SA and UniCredit SpA

-0.2

Correlation Coefficient

Ferro SA  UniCredit SpA

Good diversification

The 3 months correlation between Ferro and UniCredit is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Ferro SA and UniCredit SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UniCredit SpA and Ferro SA 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 Ferro 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 Ferro SA i.e., Ferro SA and UniCredit SpA go up and down completely randomly.

Pair Corralation between Ferro SA and UniCredit SpA

Assuming the 90 days trading horizon Ferro SA is expected to generate 4.69 times less return on investment than UniCredit SpA. But when comparing it to its historical volatility, Ferro SA is 1.1 times less risky than UniCredit SpA. It trades about 0.02 of its potential returns per unit of risk. UniCredit SpA is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  15,504  in UniCredit SpA on September 13, 2024 and sell it today you would earn a total of  1,164  from holding UniCredit SpA or generate 7.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Ferro SA  vs.  UniCredit SpA

Ferro SA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ferro SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Ferro SA 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

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in UniCredit SpA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, UniCredit SpA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ferro SA and UniCredit SpA

The main advantage of trading using opposite Ferro SA and UniCredit SpA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ferro SA 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 Ferro 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 CEOs Directory module to screen CEOs from public companies around the world.