Correlation Between Bucharest BET-NG and Athens General

Can any of the company-specific risk be diversified away by investing in both Bucharest BET-NG and Athens General 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 Bucharest BET-NG and Athens General into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bucharest BET-NG and Athens General Composite, you can compare the effects of market volatilities on Bucharest BET-NG and Athens General 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 Bucharest BET-NG with a short position of Athens General. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bucharest BET-NG and Athens General.

Diversification Opportunities for Bucharest BET-NG and Athens General

0.45

Correlation Coefficient

Bucharest BET-NG  Athens General

Very weak diversification

The 3 months correlation between Bucharest and Athens is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Bucharest BET-NG and Athens General Composite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Athens General Composite and Bucharest BET-NG 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 Bucharest BET-NG are associated (or correlated) with Athens General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Athens General Composite has no effect on the direction of Bucharest BET-NG i.e., Bucharest BET-NG and Athens General go up and down completely randomly.

Pair Corralation between Bucharest BET-NG and Athens General

Assuming the 90 days trading horizon Bucharest BET-NG is expected to under-perform the Athens General. But the index apears to be less risky and, when comparing its historical volatility, Bucharest BET-NG is 1.16 times less risky than Athens General. The index trades about -0.15 of its potential returns per unit of risk. The Athens General Composite is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  144,617  in Athens General Composite on September 1, 2024 and sell it today you would lose (5,268) from holding Athens General Composite or give up 3.64% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Bucharest BET-NG  vs.  Athens General Composite

Pair Trading with Bucharest BET-NG and Athens General

The main advantage of trading using opposite Bucharest BET-NG and Athens General positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bucharest BET-NG position performs unexpectedly, Athens General 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 Athens General will offset losses from the drop in Athens General's long position.

The idea behind Bucharest BET-NG and Athens General Composite 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.