Correlation Between CIG Pannonia and OTP Bank

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

By analyzing existing cross correlation between CIG Pannonia Life and OTP Bank Nyrt, you can compare the effects of market volatilities on CIG Pannonia and OTP Bank 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 CIG Pannonia with a short position of OTP Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of CIG Pannonia and OTP Bank.

Diversification Opportunities for CIG Pannonia and OTP Bank

0.88

Correlation Coefficient

CIG Pannonia  OTP Bank

Very poor diversification

The 3 months correlation between CIG and OTP is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding CIG Pannonia Life and OTP Bank Nyrt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OTP Bank Nyrt and CIG Pannonia 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 CIG Pannonia Life are associated (or correlated) with OTP Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OTP Bank Nyrt has no effect on the direction of CIG Pannonia i.e., CIG Pannonia and OTP Bank go up and down completely randomly.

Pair Corralation between CIG Pannonia and OTP Bank

Assuming the 90 days trading horizon CIG Pannonia is expected to generate 5.03 times less return on investment than OTP Bank. In addition to that, CIG Pannonia is 1.09 times more volatile than OTP Bank Nyrt. It trades about 0.03 of its total potential returns per unit of risk. OTP Bank Nyrt is currently generating about 0.15 per unit of volatility. If you would invest  1,742,000  in OTP Bank Nyrt on September 15, 2024 and sell it today you would earn a total of  444,000  from holding OTP Bank Nyrt or generate 25.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.21%
Values	Daily Returns

CIG Pannonia Life  vs.  OTP Bank Nyrt

CIG Pannonia Life

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CIG Pannonia Life are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, CIG Pannonia exhibited solid returns over the last few months and may actually be approaching a breakup point.

OTP Bank Nyrt

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in OTP Bank Nyrt are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, OTP Bank exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CIG Pannonia and OTP Bank

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

The idea behind CIG Pannonia Life and OTP Bank Nyrt 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.