Correlation Between CEZ As and Inter Cars

Can any of the company-specific risk be diversified away by investing in both CEZ As and Inter Cars 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 CEZ As and Inter Cars into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CEZ as and Inter Cars SA, you can compare the effects of market volatilities on CEZ As and Inter Cars 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 CEZ As with a short position of Inter Cars. Check out your portfolio center. Please also check ongoing floating volatility patterns of CEZ As and Inter Cars.

Diversification Opportunities for CEZ As and Inter Cars

0.79

Correlation Coefficient

CEZ As  Inter Cars

Poor diversification

The 3 months correlation between CEZ and Inter is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding CEZ as and Inter Cars SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inter Cars SA and CEZ As 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 CEZ as are associated (or correlated) with Inter Cars. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inter Cars SA has no effect on the direction of CEZ As i.e., CEZ As and Inter Cars go up and down completely randomly.

Pair Corralation between CEZ As and Inter Cars

Assuming the 90 days trading horizon CEZ As is expected to generate 1.93 times less return on investment than Inter Cars. In addition to that, CEZ As is 1.11 times more volatile than Inter Cars SA. It trades about 0.09 of its total potential returns per unit of risk. Inter Cars SA is currently generating about 0.19 per unit of volatility. If you would invest  47,550  in Inter Cars SA on November 20, 2024 and sell it today you would earn a total of  10,950  from holding Inter Cars SA or generate 23.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

CEZ as  vs.  Inter Cars SA

CEZ as

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CEZ as are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, CEZ As may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Inter Cars SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Inter Cars SA are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Inter Cars reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CEZ As and Inter Cars

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

The idea behind CEZ as and Inter Cars 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.