Correlation Between CEZ As and Novina SA

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

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

Diversification Opportunities for CEZ As and Novina SA

-0.15

Correlation Coefficient

CEZ As  Novina SA

Good diversification

The 3 months correlation between CEZ and Novina is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding CEZ as and Novina SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novina 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 Novina SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novina SA has no effect on the direction of CEZ As i.e., CEZ As and Novina SA go up and down completely randomly.

Pair Corralation between CEZ As and Novina SA

Assuming the 90 days trading horizon CEZ as is expected to generate 0.6 times more return on investment than Novina SA. However, CEZ as is 1.66 times less risky than Novina SA. It trades about 0.14 of its potential returns per unit of risk. Novina SA is currently generating about 0.02 per unit of risk. If you would invest  16,170  in CEZ as on December 30, 2024 and sell it today you would earn a total of  2,710  from holding CEZ as or generate 16.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

CEZ as  vs.  Novina 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 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.

Novina SA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Novina SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Novina SA is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with CEZ As and Novina SA

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

The idea behind CEZ as and Novina 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.