Correlation Between Bucharest BET-NG and Patria Bank

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Can any of the company-specific risk be diversified away by investing in both Bucharest BET-NG and Patria 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 Bucharest BET-NG and Patria Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bucharest BET-NG and Patria Bank SA, you can compare the effects of market volatilities on Bucharest BET-NG and Patria 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 Bucharest BET-NG with a short position of Patria Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bucharest BET-NG and Patria Bank.

Diversification Opportunities for Bucharest BET-NG and Patria Bank

-0.08
  Correlation Coefficient

Good diversification

The 3 months correlation between Bucharest and Patria is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Bucharest BET-NG and Patria Bank SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patria Bank SA and Bucharest BET-NG 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 Bucharest BET-NG are associated (or correlated) with Patria Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patria Bank SA has no effect on the direction of Bucharest BET-NG i.e., Bucharest BET-NG and Patria Bank go up and down completely randomly.
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Pair Corralation between Bucharest BET-NG and Patria Bank

Assuming the 90 days trading horizon Bucharest BET-NG is expected to generate 0.52 times more return on investment than Patria Bank. However, Bucharest BET-NG is 1.91 times less risky than Patria Bank. It trades about -0.18 of its potential returns per unit of risk. Patria Bank SA is currently generating about -0.14 per unit of risk. If you would invest  122,550  in Bucharest BET-NG on September 1, 2024 and sell it today you would lose (3,276) from holding Bucharest BET-NG or give up 2.67% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Bucharest BET-NG  vs.  Patria Bank SA

 Performance 
       Timeline  

Bucharest BET-NG and Patria Bank Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Bucharest BET-NG and Patria Bank

The main advantage of trading using opposite Bucharest BET-NG and Patria Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bucharest BET-NG position performs unexpectedly, Patria 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 Patria Bank will offset losses from the drop in Patria Bank's long position.
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The idea behind Bucharest BET-NG and Patria Bank 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..

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