Correlation Between Home Bancorp and UniCredit SpA

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

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

Diversification Opportunities for Home Bancorp and UniCredit SpA

-0.07

Correlation Coefficient

Home Bancorp  UniCredit SpA

Good diversification

The 3 months correlation between Home and UniCredit is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Home Bancorp 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 Home Bancorp 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 Home Bancorp 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 Home Bancorp i.e., Home Bancorp and UniCredit SpA go up and down completely randomly.

Pair Corralation between Home Bancorp and UniCredit SpA

Given the investment horizon of 90 days Home Bancorp is expected to generate 15.78 times less return on investment than UniCredit SpA. But when comparing it to its historical volatility, Home Bancorp is 1.16 times less risky than UniCredit SpA. It trades about 0.02 of its potential returns per unit of risk. UniCredit SpA ADR is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  2,005  in UniCredit SpA ADR on December 29, 2024 and sell it today you would earn a total of  878.00  from holding UniCredit SpA ADR or generate 43.79% return on investment over 90 days.

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

Home Bancorp  vs.  UniCredit SpA ADR

Home Bancorp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Home Bancorp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, Home Bancorp is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

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 23 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, UniCredit SpA showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Home Bancorp and UniCredit SpA

The main advantage of trading using opposite Home Bancorp and UniCredit SpA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Bancorp 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 Home Bancorp 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.