Correlation Between OTP Bank and ALTEO Energiaszolgalta

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

By analyzing existing cross correlation between OTP Bank Nyrt and ALTEO Energiaszolgaltato Nyrt, you can compare the effects of market volatilities on OTP Bank and ALTEO Energiaszolgalta 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 OTP Bank with a short position of ALTEO Energiaszolgalta. Check out your portfolio center. Please also check ongoing floating volatility patterns of OTP Bank and ALTEO Energiaszolgalta.

Diversification Opportunities for OTP Bank and ALTEO Energiaszolgalta

0.95

Correlation Coefficient

OTP Bank  ALTEO Energiaszolgalta

Almost no diversification

The 3 months correlation between OTP and ALTEO is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding OTP Bank Nyrt and ALTEO Energiaszolgaltato Nyrt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALTEO Energiaszolgalta and OTP Bank 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 OTP Bank Nyrt are associated (or correlated) with ALTEO Energiaszolgalta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALTEO Energiaszolgalta has no effect on the direction of OTP Bank i.e., OTP Bank and ALTEO Energiaszolgalta go up and down completely randomly.

Pair Corralation between OTP Bank and ALTEO Energiaszolgalta

Assuming the 90 days trading horizon OTP Bank is expected to generate 2.22 times less return on investment than ALTEO Energiaszolgalta. But when comparing it to its historical volatility, OTP Bank Nyrt is 1.33 times less risky than ALTEO Energiaszolgalta. It trades about 0.16 of its potential returns per unit of risk. ALTEO Energiaszolgaltato Nyrt is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  413,000  in ALTEO Energiaszolgaltato Nyrt on November 28, 2024 and sell it today you would earn a total of  127,000  from holding ALTEO Energiaszolgaltato Nyrt or generate 30.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.31%
Values	Daily Returns

OTP Bank Nyrt  vs.  ALTEO Energiaszolgaltato Nyrt

OTP Bank Nyrt

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in OTP Bank Nyrt are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, OTP Bank exhibited solid returns over the last few months and may actually be approaching a breakup point.

ALTEO Energiaszolgalta

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ALTEO Energiaszolgaltato Nyrt are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ALTEO Energiaszolgalta sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with OTP Bank and ALTEO Energiaszolgalta

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

The idea behind OTP Bank Nyrt and ALTEO Energiaszolgaltato Nyrt 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.