Correlation Between CEZ As and PMPG Polskie

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

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

Diversification Opportunities for CEZ As and PMPG Polskie

-0.29

Correlation Coefficient

CEZ As  PMPG Polskie

Very good diversification

The 3 months correlation between CEZ and PMPG is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding CEZ as and PMPG Polskie Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PMPG Polskie Media 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 PMPG Polskie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PMPG Polskie Media has no effect on the direction of CEZ As i.e., CEZ As and PMPG Polskie go up and down completely randomly.

Pair Corralation between CEZ As and PMPG Polskie

Assuming the 90 days trading horizon CEZ as is expected to generate 0.99 times more return on investment than PMPG Polskie. However, CEZ as is 1.01 times less risky than PMPG Polskie. It trades about 0.02 of its potential returns per unit of risk. PMPG Polskie Media is currently generating about -0.05 per unit of risk. If you would invest  16,450  in CEZ as on November 29, 2024 and sell it today you would earn a total of  260.00  from holding CEZ as or generate 1.58% return on investment over 90 days.

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

CEZ as  vs.  PMPG Polskie Media

CEZ as

Risk-Adjusted Performance

Modest

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

PMPG Polskie Media

Risk-Adjusted Performance

Very Weak

Over the last 90 days PMPG Polskie Media has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, PMPG Polskie 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 PMPG Polskie

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

The idea behind CEZ as and PMPG Polskie Media 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.