Correlation Between PT Bank and Magyar Telekom

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

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

Diversification Opportunities for PT Bank and Magyar Telekom

-0.65

Correlation Coefficient

PT Bank  Magyar Telekom

Excellent diversification

The 3 months correlation between PBCRF and Magyar is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Central and Magyar Telekom Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magyar Telekom Plc and PT 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 PT Bank Central are associated (or correlated) with Magyar Telekom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magyar Telekom Plc has no effect on the direction of PT Bank i.e., PT Bank and Magyar Telekom go up and down completely randomly.

Pair Corralation between PT Bank and Magyar Telekom

Assuming the 90 days horizon PT Bank is expected to generate 2.8 times less return on investment than Magyar Telekom. In addition to that, PT Bank is 1.85 times more volatile than Magyar Telekom Plc. It trades about 0.02 of its total potential returns per unit of risk. Magyar Telekom Plc is currently generating about 0.13 per unit of volatility. If you would invest  705.00  in Magyar Telekom Plc on September 26, 2024 and sell it today you would earn a total of  859.00  from holding Magyar Telekom Plc or generate 121.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	97.43%
Values	Daily Returns

PT Bank Central  vs.  Magyar Telekom Plc

PT Bank Central

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Bank Central has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Magyar Telekom Plc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Magyar Telekom Plc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Magyar Telekom may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with PT Bank and Magyar Telekom

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

The idea behind PT Bank Central and Magyar Telekom Plc 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.