Correlation Between Pepco Group and Bank Millennium

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

By analyzing existing cross correlation between Pepco Group BV and Bank Millennium SA, you can compare the effects of market volatilities on Pepco Group and Bank Millennium 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 Pepco Group with a short position of Bank Millennium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pepco Group and Bank Millennium.

Diversification Opportunities for Pepco Group and Bank Millennium

-0.1

Correlation Coefficient

Pepco Group  Bank Millennium

Good diversification

The 3 months correlation between Pepco and Bank is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Pepco Group BV and Bank Millennium SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Millennium SA and Pepco Group 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 Pepco Group BV are associated (or correlated) with Bank Millennium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Millennium SA has no effect on the direction of Pepco Group i.e., Pepco Group and Bank Millennium go up and down completely randomly.

Pair Corralation between Pepco Group and Bank Millennium

Assuming the 90 days trading horizon Pepco Group BV is expected to under-perform the Bank Millennium. But the stock apears to be less risky and, when comparing its historical volatility, Pepco Group BV is 1.03 times less risky than Bank Millennium. The stock trades about -0.08 of its potential returns per unit of risk. The Bank Millennium SA is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  900.00  in Bank Millennium SA on September 3, 2024 and sell it today you would lose (56.00) from holding Bank Millennium SA or give up 6.22% of portfolio value over 90 days.

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

Pepco Group BV  vs.  Bank Millennium SA

Pepco Group BV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pepco Group BV has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Bank Millennium SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank Millennium SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Bank Millennium is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Pepco Group and Bank Millennium

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

The idea behind Pepco Group BV and Bank Millennium SA 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.