Correlation Between CEZ As and Bank Polska
Can any of the company-specific risk be diversified away by investing in both CEZ As and Bank Polska 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 Bank Polska into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CEZ as and Bank Polska Kasa, you can compare the effects of market volatilities on CEZ As and Bank Polska 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 Bank Polska. Check out your portfolio center. Please also check ongoing floating volatility patterns of CEZ As and Bank Polska.
Diversification Opportunities for CEZ As and Bank Polska
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between CEZ and Bank is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding CEZ as and Bank Polska Kasa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Polska Kasa 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 Bank Polska. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Polska Kasa has no effect on the direction of CEZ As i.e., CEZ As and Bank Polska go up and down completely randomly.
Pair Corralation between CEZ As and Bank Polska
Assuming the 90 days trading horizon CEZ As is expected to generate 7.58 times less return on investment than Bank Polska. But when comparing it to its historical volatility, CEZ as is 1.22 times less risky than Bank Polska. It trades about 0.01 of its potential returns per unit of risk. Bank Polska Kasa is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 9,248 in Bank Polska Kasa on August 28, 2024 and sell it today you would earn a total of 4,827 from holding Bank Polska Kasa or generate 52.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CEZ as vs. Bank Polska Kasa
Performance |
| Timeline |
| CEZ as |
| Bank Polska Kasa |
CEZ As and Bank Polska Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CEZ As and Bank Polska
The main advantage of trading using opposite CEZ As and Bank Polska positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CEZ As position performs unexpectedly, Bank Polska 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 Bank Polska will offset losses from the drop in Bank Polska's long position.The idea behind CEZ as and Bank Polska Kasa 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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