Correlation Between Bucharest BET-NG and SPBVL Peru

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

Diversification Opportunities for Bucharest BET-NG and SPBVL Peru

-0.3

Correlation Coefficient

Bucharest BET-NG  SPBVL Peru

Very good diversification

The 3 months correlation between Bucharest and SPBVL is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Bucharest BET-NG and SPBVL Peru General in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPBVL Peru General 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 SPBVL Peru. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPBVL Peru General has no effect on the direction of Bucharest BET-NG i.e., Bucharest BET-NG and SPBVL Peru go up and down completely randomly.

Pair Corralation between Bucharest BET-NG and SPBVL Peru

Assuming the 90 days trading horizon Bucharest BET-NG is expected to under-perform the SPBVL Peru. But the index apears to be less risky and, when comparing its historical volatility, Bucharest BET-NG is 1.1 times less risky than SPBVL Peru. The index trades about -0.04 of its potential returns per unit of risk. The SPBVL Peru General is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  3,004,929  in SPBVL Peru General on September 1, 2024 and sell it today you would lose (34,363) from holding SPBVL Peru General or give up 1.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.22%
Values	Daily Returns

Bucharest BET-NG  vs.  SPBVL Peru General

Pair Trading with Bucharest BET-NG and SPBVL Peru

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

The idea behind Bucharest BET-NG and SPBVL Peru General 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.