Correlation Between Budapest and Magyar Telekom
Can any of the company-specific risk be diversified away by investing in both Budapest and Magyar Telekom 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 Magyar Telekom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Budapest SE and Magyar Telekom PLC, you can compare the effects of market volatilities on Budapest and Magyar Telekom 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 Magyar Telekom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Budapest and Magyar Telekom.
Diversification Opportunities for Budapest and Magyar Telekom
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Budapest and Magyar is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Budapest SE and Magyar Telekom PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magyar Telekom PLC 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 Magyar Telekom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magyar Telekom PLC has no effect on the direction of Budapest i.e., Budapest and Magyar Telekom go up and down completely randomly.
Pair Corralation between Budapest and Magyar Telekom
Assuming the 90 days trading horizon Budapest is expected to generate 2.22 times less return on investment than Magyar Telekom. But when comparing it to its historical volatility, Budapest SE is 1.39 times less risky than Magyar Telekom. It trades about 0.12 of its potential returns per unit of risk. Magyar Telekom PLC is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 85,000 in Magyar Telekom PLC on September 1, 2024 and sell it today you would earn a total of 39,000 from holding Magyar Telekom PLC or generate 45.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.46% |
| Values | Daily Returns |
Budapest SE vs. Magyar Telekom PLC
Performance |
| Timeline |
Budapest and Magyar Telekom Volatility Contrast
Predicted Return Density |
| Returns |
Magyar Telekom PLC
Pair trading matchups for Magyar Telekom
Pair Trading with Budapest and Magyar Telekom
The main advantage of trading using opposite Budapest and Magyar Telekom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Budapest position performs unexpectedly, Magyar Telekom 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 Magyar Telekom will offset losses from the drop in Magyar Telekom's long position.The idea behind Budapest SE and Magyar Telekom PLC 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.| Magyar Telekom vs. OTP Bank Nyrt | Magyar Telekom vs. OPUS GLOBAL Nyrt | Magyar Telekom vs. Raba Jarmuipari Holding | Magyar Telekom vs. Delta Technologies Nyrt |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
Other Complementary Tools
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Transaction History View history of all your transactions and understand their impact on performance |