Correlation Between UniCredit SpA and Budimex SA

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

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

Diversification Opportunities for UniCredit SpA and Budimex SA

0.57

Correlation Coefficient

UniCredit SpA  Budimex SA

Very weak diversification

The 3 months correlation between UniCredit and Budimex is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding UniCredit SpA and Budimex SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Budimex SA 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 Budimex SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Budimex SA has no effect on the direction of UniCredit SpA i.e., UniCredit SpA and Budimex SA go up and down completely randomly.

Pair Corralation between UniCredit SpA and Budimex SA

Assuming the 90 days trading horizon UniCredit SpA is expected to generate 1.11 times less return on investment than Budimex SA. But when comparing it to its historical volatility, UniCredit SpA is 1.31 times less risky than Budimex SA. It trades about 0.25 of its potential returns per unit of risk. Budimex SA is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  46,480  in Budimex SA on December 13, 2024 and sell it today you would earn a total of  16,720  from holding Budimex SA or generate 35.97% return on investment over 90 days.

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

UniCredit SpA  vs.  Budimex SA

UniCredit SpA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in UniCredit SpA are ranked lower than 19 (%) 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.

Budimex SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Budimex SA are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Budimex SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with UniCredit SpA and Budimex SA

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

The idea behind UniCredit SpA and Budimex SA 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.