Correlation Between CEZ As and Triton Development

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

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

Diversification Opportunities for CEZ As and Triton Development

-0.09

Correlation Coefficient

CEZ As  Triton Development

Good diversification

The 3 months correlation between CEZ and Triton is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding CEZ as and Triton Development SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Triton Development 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 Triton Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Triton Development has no effect on the direction of CEZ As i.e., CEZ As and Triton Development go up and down completely randomly.

Pair Corralation between CEZ As and Triton Development

Assuming the 90 days trading horizon CEZ as is expected to generate 0.52 times more return on investment than Triton Development. However, CEZ as is 1.92 times less risky than Triton Development. It trades about 0.14 of its potential returns per unit of risk. Triton Development SA is currently generating about -0.02 per unit of risk. If you would invest  16,170  in CEZ as on December 29, 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	100.0%
Values	Daily Returns

CEZ as  vs.  Triton Development 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.

Triton Development

Risk-Adjusted Performance

Very Weak

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

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

The idea behind CEZ as and Triton Development 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.