Correlation Between Magyar Telekom and Raba Jarmuipari

Can any of the company-specific risk be diversified away by investing in both Magyar Telekom and Raba Jarmuipari 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 Magyar Telekom and Raba Jarmuipari into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Magyar Telekom PLC and Raba Jarmuipari Holding, you can compare the effects of market volatilities on Magyar Telekom and Raba Jarmuipari 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 Magyar Telekom with a short position of Raba Jarmuipari. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magyar Telekom and Raba Jarmuipari.

Diversification Opportunities for Magyar Telekom and Raba Jarmuipari

0.83

Correlation Coefficient

Magyar Telekom  Raba Jarmuipari

Very poor diversification

The 3 months correlation between Magyar and Raba is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Magyar Telekom PLC and Raba Jarmuipari Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raba Jarmuipari Holding and Magyar Telekom 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 Magyar Telekom PLC are associated (or correlated) with Raba Jarmuipari. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raba Jarmuipari Holding has no effect on the direction of Magyar Telekom i.e., Magyar Telekom and Raba Jarmuipari go up and down completely randomly.

Pair Corralation between Magyar Telekom and Raba Jarmuipari

Assuming the 90 days trading horizon Magyar Telekom PLC is expected to generate 0.64 times more return on investment than Raba Jarmuipari. However, Magyar Telekom PLC is 1.57 times less risky than Raba Jarmuipari. It trades about 0.26 of its potential returns per unit of risk. Raba Jarmuipari Holding is currently generating about 0.15 per unit of risk. If you would invest  127,400  in Magyar Telekom PLC on December 30, 2024 and sell it today you would earn a total of  48,200  from holding Magyar Telekom PLC or generate 37.83% return on investment over 90 days.

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

Magyar Telekom PLC  vs.  Raba Jarmuipari Holding

Magyar Telekom PLC

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Magyar Telekom PLC are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Magyar Telekom unveiled solid returns over the last few months and may actually be approaching a breakup point.

Raba Jarmuipari Holding

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Raba Jarmuipari Holding are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Raba Jarmuipari unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Magyar Telekom and Raba Jarmuipari

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

The idea behind Magyar Telekom PLC and Raba Jarmuipari Holding 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.