Correlation Between UniCredit SpA and Credit Agricole

Can any of the company-specific risk be diversified away by investing in both UniCredit SpA and Credit Agricole 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 Credit Agricole 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 Credit Agricole SA, you can compare the effects of market volatilities on UniCredit SpA and Credit Agricole 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 Credit Agricole. Check out your portfolio center. Please also check ongoing floating volatility patterns of UniCredit SpA and Credit Agricole.

Diversification Opportunities for UniCredit SpA and Credit Agricole

0.25

Correlation Coefficient

UniCredit SpA  Credit Agricole

Modest diversification

The 3 months correlation between UniCredit and Credit is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding UniCredit SpA ADR and Credit Agricole SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credit Agricole 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 ADR are associated (or correlated) with Credit Agricole. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Credit Agricole SA has no effect on the direction of UniCredit SpA i.e., UniCredit SpA and Credit Agricole go up and down completely randomly.

Pair Corralation between UniCredit SpA and Credit Agricole

Assuming the 90 days horizon UniCredit SpA ADR is expected to generate 1.32 times more return on investment than Credit Agricole. However, UniCredit SpA is 1.32 times more volatile than Credit Agricole SA. It trades about -0.01 of its potential returns per unit of risk. Credit Agricole SA is currently generating about -0.15 per unit of risk. 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	Very Weak
Accuracy	100.0%
Values	Daily Returns

UniCredit SpA ADR  vs.  Credit Agricole SA

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.

Credit Agricole SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Credit Agricole SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with UniCredit SpA and Credit Agricole

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

The idea behind UniCredit SpA ADR and Credit Agricole 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.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.