Correlation Between Creotech Instruments and Magna Polonia

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

By analyzing existing cross correlation between Creotech Instruments SA and Magna Polonia SA, you can compare the effects of market volatilities on Creotech Instruments and Magna Polonia 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 Creotech Instruments with a short position of Magna Polonia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Creotech Instruments and Magna Polonia.

Diversification Opportunities for Creotech Instruments and Magna Polonia

0.75

Correlation Coefficient

Creotech Instruments  Magna Polonia

Poor diversification

The 3 months correlation between Creotech and Magna is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Creotech Instruments SA and Magna Polonia SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magna Polonia SA and Creotech Instruments 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 Creotech Instruments SA are associated (or correlated) with Magna Polonia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magna Polonia SA has no effect on the direction of Creotech Instruments i.e., Creotech Instruments and Magna Polonia go up and down completely randomly.

Pair Corralation between Creotech Instruments and Magna Polonia

Assuming the 90 days trading horizon Creotech Instruments SA is expected to generate 1.68 times more return on investment than Magna Polonia. However, Creotech Instruments is 1.68 times more volatile than Magna Polonia SA. It trades about 0.09 of its potential returns per unit of risk. Magna Polonia SA is currently generating about 0.09 per unit of risk. If you would invest  17,400  in Creotech Instruments SA on December 23, 2024 and sell it today you would earn a total of  2,400  from holding Creotech Instruments SA or generate 13.79% return on investment over 90 days.

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

Creotech Instruments SA  vs.  Magna Polonia SA

Creotech Instruments

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Creotech Instruments SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Creotech Instruments reported solid returns over the last few months and may actually be approaching a breakup point.

Magna Polonia SA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Magna Polonia SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Magna Polonia may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Creotech Instruments and Magna Polonia

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

The idea behind Creotech Instruments SA and Magna Polonia 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..