Correlation Between CEZ As and MW Trade

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

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

Diversification Opportunities for CEZ As and MW Trade

0.08

Correlation Coefficient

CEZ As  MW Trade

Significant diversification

The 3 months correlation between CEZ and MWT is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding CEZ as and MW Trade SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MW Trade 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 MW Trade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MW Trade SA has no effect on the direction of CEZ As i.e., CEZ As and MW Trade go up and down completely randomly.

Pair Corralation between CEZ As and MW Trade

Assuming the 90 days trading horizon CEZ As is expected to generate 1.32 times less return on investment than MW Trade. But when comparing it to its historical volatility, CEZ as is 1.83 times less risky than MW Trade. It trades about 0.14 of its potential returns per unit of risk. MW Trade SA is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  290.00  in MW Trade SA on December 29, 2024 and sell it today you would earn a total of  58.00  from holding MW Trade SA or generate 20.0% 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.  MW Trade SA

CEZ as

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CEZ as are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, CEZ As reported solid returns over the last few months and may actually be approaching a breakup point.

MW Trade SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MW Trade SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, MW Trade reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CEZ As and MW Trade

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

The idea behind CEZ as and MW Trade 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.