Correlation Between Bucharest BET-NG and Santierul Naval

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

Diversification Opportunities for Bucharest BET-NG and Santierul Naval

-0.2

Correlation Coefficient

Bucharest BET-NG  Santierul Naval

Good diversification

The 3 months correlation between Bucharest and Santierul is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Bucharest BET-NG and Santierul Naval Orsova in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Santierul Naval Orsova 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 Santierul Naval. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Santierul Naval Orsova has no effect on the direction of Bucharest BET-NG i.e., Bucharest BET-NG and Santierul Naval go up and down completely randomly.

Pair Corralation between Bucharest BET-NG and Santierul Naval

Assuming the 90 days trading horizon Bucharest BET-NG is expected to generate 1.91 times less return on investment than Santierul Naval. But when comparing it to its historical volatility, Bucharest BET-NG is 3.83 times less risky than Santierul Naval. It trades about 0.09 of its potential returns per unit of risk. Santierul Naval Orsova is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  456.00  in Santierul Naval Orsova on October 15, 2024 and sell it today you would earn a total of  244.00  from holding Santierul Naval Orsova or generate 53.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.39%
Values	Daily Returns

Bucharest BET-NG  vs.  Santierul Naval Orsova

Pair Trading with Bucharest BET-NG and Santierul Naval

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

The idea behind Bucharest BET-NG and Santierul Naval Orsova 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.