Correlation Between Beta MWIG40TR and IMC SA

Can any of the company-specific risk be diversified away by investing in both Beta MWIG40TR and IMC SA 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 Beta MWIG40TR and IMC SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Beta mWIG40TR Portfelowy and IMC SA, you can compare the effects of market volatilities on Beta MWIG40TR and IMC SA 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 Beta MWIG40TR with a short position of IMC SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beta MWIG40TR and IMC SA.

Diversification Opportunities for Beta MWIG40TR and IMC SA

0.67

Correlation Coefficient

Beta MWIG40TR  IMC SA

Poor diversification

The 3 months correlation between Beta and IMC is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Beta mWIG40TR Portfelowy and IMC SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IMC SA and Beta MWIG40TR 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 Beta mWIG40TR Portfelowy are associated (or correlated) with IMC SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IMC SA has no effect on the direction of Beta MWIG40TR i.e., Beta MWIG40TR and IMC SA go up and down completely randomly.

Pair Corralation between Beta MWIG40TR and IMC SA

Assuming the 90 days trading horizon Beta MWIG40TR is expected to generate 5.58 times less return on investment than IMC SA. But when comparing it to its historical volatility, Beta mWIG40TR Portfelowy is 6.7 times less risky than IMC SA. It trades about 0.25 of its potential returns per unit of risk. IMC SA is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  1,660  in IMC SA on December 31, 2024 and sell it today you would earn a total of  1,820  from holding IMC SA or generate 109.64% return on investment over 90 days.

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

Beta mWIG40TR Portfelowy  vs.  IMC SA

Beta mWIG40TR Portfelowy

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Beta mWIG40TR Portfelowy are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beta MWIG40TR sustained solid returns over the last few months and may actually be approaching a breakup point.

IMC SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in IMC SA are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, IMC SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Beta MWIG40TR and IMC SA

The main advantage of trading using opposite Beta MWIG40TR and IMC SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beta MWIG40TR position performs unexpectedly, IMC SA 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 IMC SA will offset losses from the drop in IMC SA's long position.

The idea behind Beta mWIG40TR Portfelowy and IMC 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.