Correlation Between Bucharest BET-NG and Fondul Deschis

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

Diversification Opportunities for Bucharest BET-NG and Fondul Deschis

0.93

Correlation Coefficient

Bucharest BET-NG  Fondul Deschis

Almost no diversification

The 3 months correlation between Bucharest and Fondul is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Bucharest BET-NG and Fondul Deschis De in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fondul Deschis De 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 Fondul Deschis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fondul Deschis De has no effect on the direction of Bucharest BET-NG i.e., Bucharest BET-NG and Fondul Deschis go up and down completely randomly.

Pair Corralation between Bucharest BET-NG and Fondul Deschis

Assuming the 90 days trading horizon Bucharest BET-NG is expected to generate 1.24 times less return on investment than Fondul Deschis. But when comparing it to its historical volatility, Bucharest BET-NG is 1.09 times less risky than Fondul Deschis. It trades about 0.09 of its potential returns per unit of risk. Fondul Deschis De is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,832  in Fondul Deschis De on October 15, 2024 and sell it today you would earn a total of  871.00  from holding Fondul Deschis De or generate 47.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.79%
Values	Daily Returns

Bucharest BET-NG  vs.  Fondul Deschis De

Pair Trading with Bucharest BET-NG and Fondul Deschis

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

The idea behind Bucharest BET-NG and Fondul Deschis De 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.