Correlation Between Bucharest BET-NG and Promateris

Can any of the company-specific risk be diversified away by investing in both Bucharest BET-NG and Promateris 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 Promateris 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 Promateris SA, you can compare the effects of market volatilities on Bucharest BET-NG and Promateris 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 Promateris. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bucharest BET-NG and Promateris.

Diversification Opportunities for Bucharest BET-NG and Promateris

0.45

Correlation Coefficient

Bucharest BET-NG  Promateris

Very weak diversification

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

Pair Corralation between Bucharest BET-NG and Promateris

Assuming the 90 days trading horizon Bucharest BET-NG is expected to generate 0.33 times more return on investment than Promateris. However, Bucharest BET-NG is 3.04 times less risky than Promateris. It trades about 0.31 of its potential returns per unit of risk. Promateris SA is currently generating about -0.03 per unit of risk. If you would invest  118,464  in Bucharest BET-NG on October 20, 2024 and sell it today you would earn a total of  4,390  from holding Bucharest BET-NG or generate 3.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	93.33%
Values	Daily Returns

Bucharest BET-NG  vs.  Promateris SA

Pair Trading with Bucharest BET-NG and Promateris

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

The idea behind Bucharest BET-NG and Promateris SA 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.