Correlation Between CEZ As and Stalprodukt

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

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

Diversification Opportunities for CEZ As and Stalprodukt

-0.83

Correlation Coefficient

CEZ As  Stalprodukt

Pay attention - limited upside

The 3 months correlation between CEZ and Stalprodukt is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding CEZ as and Stalprodukt SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stalprodukt 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 Stalprodukt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stalprodukt SA has no effect on the direction of CEZ As i.e., CEZ As and Stalprodukt go up and down completely randomly.

Pair Corralation between CEZ As and Stalprodukt

Assuming the 90 days trading horizon CEZ as is expected to generate 1.89 times more return on investment than Stalprodukt. However, CEZ As is 1.89 times more volatile than Stalprodukt SA. It trades about 0.08 of its potential returns per unit of risk. Stalprodukt SA is currently generating about -0.1 per unit of risk. If you would invest  15,300  in CEZ as on September 23, 2024 and sell it today you would earn a total of  1,000.00  from holding CEZ as or generate 6.54% return on investment over 90 days.

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

CEZ as  vs.  Stalprodukt SA

CEZ as

Risk-Adjusted Performance

7 of 100

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 January 2025.

Stalprodukt SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stalprodukt SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with CEZ As and Stalprodukt

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

The idea behind CEZ as and Stalprodukt 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.