Correlation Between UniCredit SpA and CFI Holding

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

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

Diversification Opportunities for UniCredit SpA and CFI Holding

0.42

Correlation Coefficient

UniCredit SpA  CFI Holding

Very weak diversification

The 3 months correlation between UniCredit and CFI is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding UniCredit SpA and CFI Holding SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CFI Holding 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 CFI Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CFI Holding SA has no effect on the direction of UniCredit SpA i.e., UniCredit SpA and CFI Holding go up and down completely randomly.

Pair Corralation between UniCredit SpA and CFI Holding

Assuming the 90 days trading horizon UniCredit SpA is expected to generate 0.37 times more return on investment than CFI Holding. However, UniCredit SpA is 2.68 times less risky than CFI Holding. It trades about 0.08 of its potential returns per unit of risk. CFI Holding SA is currently generating about 0.01 per unit of risk. If you would invest  16,810  in UniCredit SpA on October 24, 2024 and sell it today you would earn a total of  1,406  from holding UniCredit SpA or generate 8.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	92.98%
Values	Daily Returns

UniCredit SpA  vs.  CFI Holding SA

UniCredit SpA

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in UniCredit SpA are ranked lower than 6 (%) 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 February 2025.

CFI Holding SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with UniCredit SpA and CFI Holding

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

The idea behind UniCredit SpA and CFI Holding 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.

Check out your portfolio center.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.