Correlation Between OTP Bank and CIG Pannonia

Can any of the company-specific risk be diversified away by investing in both OTP Bank and CIG Pannonia 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 CIG Pannonia 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 CIG Pannonia Life, you can compare the effects of market volatilities on OTP Bank and CIG Pannonia 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 CIG Pannonia. Check out your portfolio center. Please also check ongoing floating volatility patterns of OTP Bank and CIG Pannonia.

Diversification Opportunities for OTP Bank and CIG Pannonia

0.88

Correlation Coefficient

OTP Bank  CIG Pannonia

Very poor diversification

The 3 months correlation between OTP and CIG is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding OTP Bank Nyrt and CIG Pannonia Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CIG Pannonia Life 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 CIG Pannonia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CIG Pannonia Life has no effect on the direction of OTP Bank i.e., OTP Bank and CIG Pannonia go up and down completely randomly.

Pair Corralation between OTP Bank and CIG Pannonia

Assuming the 90 days trading horizon OTP Bank Nyrt is expected to generate 0.92 times more return on investment than CIG Pannonia. However, OTP Bank Nyrt is 1.09 times less risky than CIG Pannonia. It trades about 0.15 of its potential returns per unit of risk. CIG Pannonia Life is currently generating about 0.03 per unit of risk. If you would invest  1,742,000  in OTP Bank Nyrt on September 15, 2024 and sell it today you would earn a total of  444,000  from holding OTP Bank Nyrt or generate 25.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.21%
Values	Daily Returns

OTP Bank Nyrt  vs.  CIG Pannonia Life

OTP Bank Nyrt

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in OTP Bank Nyrt are ranked lower than 17 (%) 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.

CIG Pannonia Life

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CIG Pannonia Life are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, CIG Pannonia exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with OTP Bank and CIG Pannonia

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

The idea behind OTP Bank Nyrt and CIG Pannonia Life 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.