Correlation Between MCX ICOMDEX and Bucharest BET-NG

Can any of the company-specific risk be diversified away by investing in both MCX ICOMDEX and Bucharest BET-NG 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 MCX ICOMDEX and Bucharest BET-NG into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MCX ICOMDEX ALUMINIUM and Bucharest BET-NG, you can compare the effects of market volatilities on MCX ICOMDEX and Bucharest BET-NG 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 MCX ICOMDEX with a short position of Bucharest BET-NG. Check out your portfolio center. Please also check ongoing floating volatility patterns of MCX ICOMDEX and Bucharest BET-NG.

Diversification Opportunities for MCX ICOMDEX and Bucharest BET-NG

-0.63

Correlation Coefficient

MCX ICOMDEX  Bucharest BET-NG

Excellent diversification

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

Pair Corralation between MCX ICOMDEX and Bucharest BET-NG

Assuming the 90 days trading horizon MCX ICOMDEX ALUMINIUM is expected to under-perform the Bucharest BET-NG. But the index apears to be less risky and, when comparing its historical volatility, MCX ICOMDEX ALUMINIUM is 1.38 times less risky than Bucharest BET-NG. The index trades about -0.7 of its potential returns per unit of risk. The Bucharest BET-NG is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest  123,270  in Bucharest BET-NG on August 30, 2024 and sell it today you would lose (2,410) from holding Bucharest BET-NG or give up 1.96% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	18.18%
Values	Daily Returns

MCX ICOMDEX ALUMINIUM  vs.  Bucharest BET-NG

Pair Trading with MCX ICOMDEX and Bucharest BET-NG

The main advantage of trading using opposite MCX ICOMDEX and Bucharest BET-NG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MCX ICOMDEX position performs unexpectedly, Bucharest BET-NG 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 Bucharest BET-NG will offset losses from the drop in Bucharest BET-NG's long position.

The idea behind MCX ICOMDEX ALUMINIUM and Bucharest BET-NG 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 Anywhere module to track or share privately all of your investments from the convenience of any device.