Correlation Between Bank Polska and Pepco Group
Can any of the company-specific risk be diversified away by investing in both Bank Polska and Pepco Group 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 Bank Polska and Pepco Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank Polska Kasa and Pepco Group BV, you can compare the effects of market volatilities on Bank Polska and Pepco Group 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 Bank Polska with a short position of Pepco Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Polska and Pepco Group.
Diversification Opportunities for Bank Polska and Pepco Group
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bank and Pepco is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Bank Polska Kasa and Pepco Group BV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pepco Group BV and Bank Polska 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 Bank Polska Kasa are associated (or correlated) with Pepco Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pepco Group BV has no effect on the direction of Bank Polska i.e., Bank Polska and Pepco Group go up and down completely randomly.
Pair Corralation between Bank Polska and Pepco Group
Assuming the 90 days trading horizon Bank Polska Kasa is expected to generate 0.74 times more return on investment than Pepco Group. However, Bank Polska Kasa is 1.35 times less risky than Pepco Group. It trades about 0.08 of its potential returns per unit of risk. Pepco Group BV is currently generating about -0.06 per unit of risk. If you would invest 7,766 in Bank Polska Kasa on October 23, 2024 and sell it today you would earn a total of 6,959 from holding Bank Polska Kasa or generate 89.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank Polska Kasa vs. Pepco Group BV
Performance |
| Timeline |
| Bank Polska Kasa |
| Pepco Group BV |
Bank Polska and Pepco Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank Polska and Pepco Group
The main advantage of trading using opposite Bank Polska and Pepco Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Polska position performs unexpectedly, Pepco Group 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 Pepco Group will offset losses from the drop in Pepco Group's long position.| Bank Polska vs. Cloud Technologies SA | Bank Polska vs. PLAYWAY SA | Bank Polska vs. Creotech Instruments SA | Bank Polska vs. Quantum Software SA |
| Pepco Group vs. Echo Investment SA | Pepco Group vs. GreenX Metals | Pepco Group vs. Marie Brizard Wine | Pepco Group vs. Skyline Investment 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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