Correlation Between Intesa Sanpaolo and UniCredit SpA

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

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

Diversification Opportunities for Intesa Sanpaolo and UniCredit SpA

0.83

Correlation Coefficient

Intesa Sanpaolo  UniCredit SpA

Very poor diversification

The 3 months correlation between Intesa and UniCredit is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Intesa Sanpaolo SpA and UniCredit SpA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UniCredit SpA ADR and Intesa Sanpaolo 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 Intesa Sanpaolo SpA 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 ADR has no effect on the direction of Intesa Sanpaolo i.e., Intesa Sanpaolo and UniCredit SpA go up and down completely randomly.

Pair Corralation between Intesa Sanpaolo and UniCredit SpA

Assuming the 90 days horizon Intesa Sanpaolo SpA is expected to under-perform the UniCredit SpA. But the pink sheet apears to be less risky and, when comparing its historical volatility, Intesa Sanpaolo SpA is 1.23 times less risky than UniCredit SpA. The pink sheet trades about -0.06 of its potential returns per unit of risk. The UniCredit SpA ADR is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,965  in UniCredit SpA ADR on September 2, 2024 and sell it today you would lose (53.00) from holding UniCredit SpA ADR or give up 2.7% of portfolio value over 90 days.

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

Intesa Sanpaolo SpA  vs.  UniCredit SpA ADR

Intesa Sanpaolo SpA

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with Intesa Sanpaolo and UniCredit SpA

The main advantage of trading using opposite Intesa Sanpaolo and UniCredit SpA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intesa Sanpaolo 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 Intesa Sanpaolo SpA and UniCredit SpA ADR 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.