Correlation Between Budapest and ENEFI Energiahatekonys
Can any of the company-specific risk be diversified away by investing in both Budapest and ENEFI Energiahatekonys 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 Budapest and ENEFI Energiahatekonys into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Budapest SE and ENEFI Energiahatekonysagi Nyrt, you can compare the effects of market volatilities on Budapest and ENEFI Energiahatekonys 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 Budapest with a short position of ENEFI Energiahatekonys. Check out your portfolio center. Please also check ongoing floating volatility patterns of Budapest and ENEFI Energiahatekonys.
Diversification Opportunities for Budapest and ENEFI Energiahatekonys
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Budapest and ENEFI is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Budapest SE and ENEFI Energiahatekonysagi Nyrt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENEFI Energiahatekonys and Budapest 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 Budapest SE are associated (or correlated) with ENEFI Energiahatekonys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENEFI Energiahatekonys has no effect on the direction of Budapest i.e., Budapest and ENEFI Energiahatekonys go up and down completely randomly.
Pair Corralation between Budapest and ENEFI Energiahatekonys
Assuming the 90 days trading horizon Budapest is expected to generate 1.47 times less return on investment than ENEFI Energiahatekonys. But when comparing it to its historical volatility, Budapest SE is 2.14 times less risky than ENEFI Energiahatekonys. It trades about 0.28 of its potential returns per unit of risk. ENEFI Energiahatekonysagi Nyrt is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 21,600 in ENEFI Energiahatekonysagi Nyrt on September 1, 2024 and sell it today you would earn a total of 1,800 from holding ENEFI Energiahatekonysagi Nyrt or generate 8.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Budapest SE vs. ENEFI Energiahatekonysagi Nyrt
Performance |
| Timeline |
Budapest and ENEFI Energiahatekonys Volatility Contrast
Predicted Return Density |
| Returns |
ENEFI Energiahatekonysagi Nyrt
Pair trading matchups for ENEFI Energiahatekonys
Pair Trading with Budapest and ENEFI Energiahatekonys
The main advantage of trading using opposite Budapest and ENEFI Energiahatekonys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Budapest position performs unexpectedly, ENEFI Energiahatekonys 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 ENEFI Energiahatekonys will offset losses from the drop in ENEFI Energiahatekonys' long position.The idea behind Budapest SE and ENEFI Energiahatekonysagi Nyrt 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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