Correlation Between AD Plastik and Hrvatski Telekom

Can any of the company-specific risk be diversified away by investing in both AD Plastik and Hrvatski Telekom 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 AD Plastik and Hrvatski Telekom into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AD Plastik dd and Hrvatski Telekom dd, you can compare the effects of market volatilities on AD Plastik and Hrvatski Telekom 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 AD Plastik with a short position of Hrvatski Telekom. Check out your portfolio center. Please also check ongoing floating volatility patterns of AD Plastik and Hrvatski Telekom.

Diversification Opportunities for AD Plastik and Hrvatski Telekom

0.81

Correlation Coefficient

AD Plastik  Hrvatski Telekom

Very poor diversification

The 3 months correlation between ADPL and Hrvatski is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding AD Plastik dd and Hrvatski Telekom dd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hrvatski Telekom and AD Plastik 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 AD Plastik dd are associated (or correlated) with Hrvatski Telekom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hrvatski Telekom has no effect on the direction of AD Plastik i.e., AD Plastik and Hrvatski Telekom go up and down completely randomly.

Pair Corralation between AD Plastik and Hrvatski Telekom

Assuming the 90 days trading horizon AD Plastik dd is expected to generate 3.03 times more return on investment than Hrvatski Telekom. However, AD Plastik is 3.03 times more volatile than Hrvatski Telekom dd. It trades about 0.06 of its potential returns per unit of risk. Hrvatski Telekom dd is currently generating about 0.12 per unit of risk. If you would invest  946.00  in AD Plastik dd on December 30, 2024 and sell it today you would earn a total of  94.00  from holding AD Plastik dd or generate 9.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

AD Plastik dd  vs.  Hrvatski Telekom dd

AD Plastik dd

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AD Plastik dd are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, AD Plastik unveiled solid returns over the last few months and may actually be approaching a breakup point.

Hrvatski Telekom

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hrvatski Telekom dd are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Hrvatski Telekom may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with AD Plastik and Hrvatski Telekom

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

The idea behind AD Plastik dd and Hrvatski Telekom dd 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.