Correlation Between MOL Hungarian and Caledonia Investments

Can any of the company-specific risk be diversified away by investing in both MOL Hungarian and Caledonia Investments 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 MOL Hungarian and Caledonia Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MOL Hungarian Oil and Caledonia Investments, you can compare the effects of market volatilities on MOL Hungarian and Caledonia Investments 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 MOL Hungarian with a short position of Caledonia Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of MOL Hungarian and Caledonia Investments.

Diversification Opportunities for MOL Hungarian and Caledonia Investments

0.19

Correlation Coefficient

MOL Hungarian  Caledonia Investments

Average diversification

The 3 months correlation between MOL and Caledonia is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding MOL Hungarian Oil and Caledonia Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caledonia Investments and MOL Hungarian 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 MOL Hungarian Oil are associated (or correlated) with Caledonia Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caledonia Investments has no effect on the direction of MOL Hungarian i.e., MOL Hungarian and Caledonia Investments go up and down completely randomly.

Pair Corralation between MOL Hungarian and Caledonia Investments

Assuming the 90 days trading horizon MOL Hungarian Oil is expected to generate 1.13 times more return on investment than Caledonia Investments. However, MOL Hungarian is 1.13 times more volatile than Caledonia Investments. It trades about 0.02 of its potential returns per unit of risk. Caledonia Investments is currently generating about 0.01 per unit of risk. If you would invest  275,256  in MOL Hungarian Oil on October 24, 2024 and sell it today you would earn a total of  16,944  from holding MOL Hungarian Oil or generate 6.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	93.37%
Values	Daily Returns

MOL Hungarian Oil  vs.  Caledonia Investments

MOL Hungarian Oil

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MOL Hungarian Oil are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, MOL Hungarian is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Caledonia Investments

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Caledonia Investments are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Caledonia Investments may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with MOL Hungarian and Caledonia Investments

The main advantage of trading using opposite MOL Hungarian and Caledonia Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MOL Hungarian position performs unexpectedly, Caledonia Investments 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 Caledonia Investments will offset losses from the drop in Caledonia Investments' long position.

The idea behind MOL Hungarian Oil and Caledonia Investments 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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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..