Correlation Between UniCredit SpA and Home Bancorp

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

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

Diversification Opportunities for UniCredit SpA and Home Bancorp

0.04

Correlation Coefficient

UniCredit SpA  Home Bancorp

Significant diversification

The 3 months correlation between UniCredit and Home is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding UniCredit SpA ADR and Home Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Bancorp 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 ADR are associated (or correlated) with Home Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Bancorp has no effect on the direction of UniCredit SpA i.e., UniCredit SpA and Home Bancorp go up and down completely randomly.

Pair Corralation between UniCredit SpA and Home Bancorp

Assuming the 90 days horizon UniCredit SpA ADR is expected to under-perform the Home Bancorp. But the pink sheet apears to be less risky and, when comparing its historical volatility, UniCredit SpA ADR is 1.16 times less risky than Home Bancorp. The pink sheet trades about -0.01 of its potential returns per unit of risk. The Home Bancorp is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  4,256  in Home Bancorp on September 3, 2024 and sell it today you would earn a total of  817.00  from holding Home Bancorp or generate 19.2% return on investment over 90 days.

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

UniCredit SpA ADR  vs.  Home Bancorp

UniCredit SpA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UniCredit SpA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, UniCredit SpA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Home Bancorp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Home Bancorp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating fundamental indicators, Home Bancorp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with UniCredit SpA and Home Bancorp

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

The idea behind UniCredit SpA ADR and Home Bancorp 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.