Correlation Between Pepco Group and AB SA
Can any of the company-specific risk be diversified away by investing in both Pepco Group and AB 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 Pepco Group and AB SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pepco Group BV and AB SA, you can compare the effects of market volatilities on Pepco Group and AB 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 Pepco Group with a short position of AB SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pepco Group and AB SA.
Diversification Opportunities for Pepco Group and AB SA
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pepco and ABE is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Pepco Group BV and AB SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB SA and Pepco Group 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 Pepco Group BV are associated (or correlated) with AB SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB SA has no effect on the direction of Pepco Group i.e., Pepco Group and AB SA go up and down completely randomly.
Pair Corralation between Pepco Group and AB SA
Assuming the 90 days trading horizon Pepco Group BV is expected to under-perform the AB SA. In addition to that, Pepco Group is 1.25 times more volatile than AB SA. It trades about -0.06 of its total potential returns per unit of risk. AB SA is currently generating about 0.07 per unit of volatility. If you would invest 4,879 in AB SA on September 3, 2024 and sell it today you would earn a total of 4,121 from holding AB SA or generate 84.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pepco Group BV vs. AB SA
Performance |
| Timeline |
| Pepco Group BV |
| AB SA |
Pepco Group and AB SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pepco Group and AB SA
The main advantage of trading using opposite Pepco Group and AB SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pepco Group position performs unexpectedly, AB 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 AB SA will offset losses from the drop in AB SA's long position.| Pepco Group vs. Bank Millennium SA | Pepco Group vs. PMPG Polskie Media | Pepco Group vs. Noble Financials SA | Pepco Group vs. Globe Trade Centre |
| AB SA vs. Globe Trade Centre | AB SA vs. New Tech Venture | AB SA vs. Kool2play SA | AB SA vs. Creotech Instruments SA |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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