Correlation Between Athens Water and Hellenic Petroleum

Can any of the company-specific risk be diversified away by investing in both Athens Water and Hellenic Petroleum 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 Athens Water and Hellenic Petroleum into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Athens Water Supply and Hellenic Petroleum SA, you can compare the effects of market volatilities on Athens Water and Hellenic Petroleum 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 Athens Water with a short position of Hellenic Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Athens Water and Hellenic Petroleum.

Diversification Opportunities for Athens Water and Hellenic Petroleum

0.63

Correlation Coefficient

Athens Water  Hellenic Petroleum

Poor diversification

The 3 months correlation between Athens and Hellenic is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Athens Water Supply and Hellenic Petroleum SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hellenic Petroleum and Athens Water 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 Athens Water Supply are associated (or correlated) with Hellenic Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hellenic Petroleum has no effect on the direction of Athens Water i.e., Athens Water and Hellenic Petroleum go up and down completely randomly.

Pair Corralation between Athens Water and Hellenic Petroleum

Assuming the 90 days trading horizon Athens Water Supply is expected to under-perform the Hellenic Petroleum. But the stock apears to be less risky and, when comparing its historical volatility, Athens Water Supply is 1.13 times less risky than Hellenic Petroleum. The stock trades about -0.01 of its potential returns per unit of risk. The Hellenic Petroleum SA is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  682.00  in Hellenic Petroleum SA on December 5, 2024 and sell it today you would earn a total of  94.00  from holding Hellenic Petroleum SA or generate 13.78% return on investment over 90 days.

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

Athens Water Supply  vs.  Hellenic Petroleum SA

Athens Water Supply

Risk-Adjusted Performance

Very Weak

Over the last 90 days Athens Water Supply has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Athens Water is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Hellenic Petroleum

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hellenic Petroleum SA are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Hellenic Petroleum unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Athens Water and Hellenic Petroleum

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

The idea behind Athens Water Supply and Hellenic Petroleum 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.