Correlation Between CEZ As and Enea SA
Can any of the company-specific risk be diversified away by investing in both CEZ As and Enea SA 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 CEZ As and Enea SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CEZ as and Enea SA, you can compare the effects of market volatilities on CEZ As and Enea SA 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 CEZ As with a short position of Enea SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of CEZ As and Enea SA.
Diversification Opportunities for CEZ As and Enea SA
Poor diversification
The 3 months correlation between CEZ and Enea is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding CEZ as and Enea SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enea SA and CEZ As 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 CEZ as are associated (or correlated) with Enea SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enea SA has no effect on the direction of CEZ As i.e., CEZ As and Enea SA go up and down completely randomly.
Pair Corralation between CEZ As and Enea SA
Assuming the 90 days trading horizon CEZ as is expected to generate 1.33 times more return on investment than Enea SA. However, CEZ As is 1.33 times more volatile than Enea SA. It trades about 0.14 of its potential returns per unit of risk. Enea SA is currently generating about 0.11 per unit of risk. If you would invest 15,400 in CEZ as on September 1, 2024 and sell it today you would earn a total of 1,050 from holding CEZ as or generate 6.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CEZ as vs. Enea SA
Performance |
| Timeline |
| CEZ as |
| Enea SA |
CEZ As and Enea SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CEZ As and Enea SA
The main advantage of trading using opposite CEZ As and Enea SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CEZ As position performs unexpectedly, Enea SA 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 Enea SA will offset losses from the drop in Enea SA's long position.| CEZ As vs. SOFTWARE MANSION SPOLKA | CEZ As vs. LSI Software SA | CEZ As vs. PMPG Polskie Media | CEZ As vs. Globe Trade Centre |
| Enea SA vs. Live Motion Games | Enea SA vs. True Games Syndicate | Enea SA vs. mBank SA | Enea SA vs. Santander Bank Polska |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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