Correlation Between Globe Trade and Bank Millennium

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

By analyzing existing cross correlation between Globe Trade Centre and Bank Millennium SA, you can compare the effects of market volatilities on Globe Trade and Bank Millennium 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 Globe Trade with a short position of Bank Millennium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Globe Trade and Bank Millennium.

Diversification Opportunities for Globe Trade and Bank Millennium

-0.51

Correlation Coefficient

Globe Trade  Bank Millennium

Excellent diversification

The 3 months correlation between Globe and Bank is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Globe Trade Centre and Bank Millennium SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Millennium SA and Globe Trade 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 Globe Trade Centre are associated (or correlated) with Bank Millennium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Millennium SA has no effect on the direction of Globe Trade i.e., Globe Trade and Bank Millennium go up and down completely randomly.

Pair Corralation between Globe Trade and Bank Millennium

Assuming the 90 days trading horizon Globe Trade Centre is expected to under-perform the Bank Millennium. But the stock apears to be less risky and, when comparing its historical volatility, Globe Trade Centre is 1.08 times less risky than Bank Millennium. The stock trades about -0.05 of its potential returns per unit of risk. The Bank Millennium SA is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  788.00  in Bank Millennium SA on October 25, 2024 and sell it today you would earn a total of  216.00  from holding Bank Millennium SA or generate 27.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Globe Trade Centre  vs.  Bank Millennium SA

Globe Trade Centre

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Globe Trade Centre has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Globe Trade is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Bank Millennium SA

Risk-Adjusted Performance

16 of 100

Good

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

Pair Trading with Globe Trade and Bank Millennium

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

The idea behind Globe Trade Centre and Bank Millennium 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.