Correlation Between CEZ As and Grupa KTY

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

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

Diversification Opportunities for CEZ As and Grupa KTY

0.13

Correlation Coefficient

CEZ As  Grupa KTY

Average diversification

The 3 months correlation between CEZ and Grupa is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding CEZ as and Grupa KTY SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupa KTY 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 Grupa KTY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupa KTY SA has no effect on the direction of CEZ As i.e., CEZ As and Grupa KTY go up and down completely randomly.

Pair Corralation between CEZ As and Grupa KTY

Assuming the 90 days trading horizon CEZ As is expected to generate 2.55 times less return on investment than Grupa KTY. In addition to that, CEZ As is 1.08 times more volatile than Grupa KTY SA. It trades about 0.03 of its total potential returns per unit of risk. Grupa KTY SA is currently generating about 0.07 per unit of volatility. If you would invest  44,156  in Grupa KTY SA on October 26, 2024 and sell it today you would earn a total of  29,844  from holding Grupa KTY SA or generate 67.59% return on investment over 90 days.

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

CEZ as  vs.  Grupa KTY SA

CEZ as

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CEZ as are ranked lower than 6 (%) 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 February 2025.

Grupa KTY SA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Grupa KTY SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Grupa KTY may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with CEZ As and Grupa KTY

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

The idea behind CEZ as and Grupa KTY 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.