Correlation Between UniCredit SpA and Santander Bank

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

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

Diversification Opportunities for UniCredit SpA and Santander Bank

-0.33

Correlation Coefficient

UniCredit SpA  Santander Bank

Very good diversification

The 3 months correlation between UniCredit and Santander is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding UniCredit SpA and Santander Bank Polska in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Santander Bank Polska 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 Santander Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Santander Bank Polska has no effect on the direction of UniCredit SpA i.e., UniCredit SpA and Santander Bank go up and down completely randomly.

Pair Corralation between UniCredit SpA and Santander Bank

Assuming the 90 days trading horizon UniCredit SpA is expected to generate 0.92 times more return on investment than Santander Bank. However, UniCredit SpA is 1.08 times less risky than Santander Bank. It trades about 0.0 of its potential returns per unit of risk. Santander Bank Polska is currently generating about -0.14 per unit of risk. If you would invest  15,739  in UniCredit SpA on September 2, 2024 and sell it today you would lose (207.00) from holding UniCredit SpA or give up 1.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.31%
Values	Daily Returns

UniCredit SpA  vs.  Santander Bank Polska

UniCredit SpA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Santander Bank Polska

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Santander Bank Polska has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with UniCredit SpA and Santander Bank

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

The idea behind UniCredit SpA and Santander Bank Polska 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.