Correlation Between Dino Polska and Pepco Group

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

By analyzing existing cross correlation between Dino Polska SA and Pepco Group BV, you can compare the effects of market volatilities on Dino Polska and Pepco Group 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 Dino Polska with a short position of Pepco Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dino Polska and Pepco Group.

Diversification Opportunities for Dino Polska and Pepco Group

0.15

Correlation Coefficient

Dino Polska  Pepco Group

Average diversification

The 3 months correlation between Dino and Pepco is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Dino Polska SA and Pepco Group BV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pepco Group BV and Dino Polska 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 Dino Polska SA are associated (or correlated) with Pepco Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pepco Group BV has no effect on the direction of Dino Polska i.e., Dino Polska and Pepco Group go up and down completely randomly.

Pair Corralation between Dino Polska and Pepco Group

Assuming the 90 days trading horizon Dino Polska SA is expected to generate 0.58 times more return on investment than Pepco Group. However, Dino Polska SA is 1.73 times less risky than Pepco Group. It trades about 0.23 of its potential returns per unit of risk. Pepco Group BV is currently generating about 0.09 per unit of risk. If you would invest  39,270  in Dino Polska SA on November 20, 2024 and sell it today you would earn a total of  8,330  from holding Dino Polska SA or generate 21.21% return on investment over 90 days.

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

Dino Polska SA  vs.  Pepco Group BV

Dino Polska SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dino Polska SA are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Dino Polska reported solid returns over the last few months and may actually be approaching a breakup point.

Pepco Group BV

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pepco Group BV are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Pepco Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dino Polska and Pepco Group

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

The idea behind Dino Polska SA and Pepco Group BV 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.