Correlation Between Bank of Greece and Karelia Tobacco
Can any of the company-specific risk be diversified away by investing in both Bank of Greece and Karelia Tobacco 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 of Greece and Karelia Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of Greece and Karelia Tobacco, you can compare the effects of market volatilities on Bank of Greece and Karelia Tobacco 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 of Greece with a short position of Karelia Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Greece and Karelia Tobacco.
Diversification Opportunities for Bank of Greece and Karelia Tobacco
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bank and Karelia is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Greece and Karelia Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Karelia Tobacco and Bank of Greece 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 of Greece are associated (or correlated) with Karelia Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Karelia Tobacco has no effect on the direction of Bank of Greece i.e., Bank of Greece and Karelia Tobacco go up and down completely randomly.
Pair Corralation between Bank of Greece and Karelia Tobacco
Assuming the 90 days trading horizon Bank of Greece is expected to under-perform the Karelia Tobacco. But the stock apears to be less risky and, when comparing its historical volatility, Bank of Greece is 1.44 times less risky than Karelia Tobacco. The stock trades about -0.11 of its potential returns per unit of risk. The Karelia Tobacco is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest 34,200 in Karelia Tobacco on August 27, 2024 and sell it today you would lose (600.00) from holding Karelia Tobacco or give up 1.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of Greece vs. Karelia Tobacco
Performance |
| Timeline |
| Bank of Greece |
| Karelia Tobacco |
Bank of Greece and Karelia Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of Greece and Karelia Tobacco
The main advantage of trading using opposite Bank of Greece and Karelia Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Greece position performs unexpectedly, Karelia Tobacco 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 Karelia Tobacco will offset losses from the drop in Karelia Tobacco's long position.The idea behind Bank of Greece and Karelia Tobacco 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.
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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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