Correlation Between Globe Trade and UniCredit SpA

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

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

Diversification Opportunities for Globe Trade and UniCredit SpA

0.37

Correlation Coefficient

Globe Trade  UniCredit SpA

Weak diversification

The 3 months correlation between Globe and UniCredit is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Globe Trade Centre and UniCredit SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UniCredit SpA and Globe Trade 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 Globe Trade Centre 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 has no effect on the direction of Globe Trade i.e., Globe Trade and UniCredit SpA go up and down completely randomly.

Pair Corralation between Globe Trade and UniCredit SpA

Assuming the 90 days trading horizon Globe Trade Centre is expected to under-perform the UniCredit SpA. But the stock apears to be less risky and, when comparing its historical volatility, Globe Trade Centre is 1.57 times less risky than UniCredit SpA. The stock trades about -0.02 of its potential returns per unit of risk. The UniCredit SpA is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  6,052  in UniCredit SpA on September 30, 2024 and sell it today you would earn a total of  10,398  from holding UniCredit SpA or generate 171.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	86.87%
Values	Daily Returns

Globe Trade Centre  vs.  UniCredit SpA

Globe Trade Centre

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Globe Trade Centre has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

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.

Pair Trading with Globe Trade and UniCredit SpA

The main advantage of trading using opposite Globe Trade and UniCredit SpA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Globe Trade 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 Globe Trade Centre and UniCredit SpA 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.