Correlation Between Pepco Group and Polski Koncern

Can any of the company-specific risk be diversified away by investing in both Pepco Group and Polski Koncern 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 Polski Koncern 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 Polski Koncern Naftowy, you can compare the effects of market volatilities on Pepco Group and Polski Koncern 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 Polski Koncern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pepco Group and Polski Koncern.

Diversification Opportunities for Pepco Group and Polski Koncern

0.5

Correlation Coefficient

Pepco Group  Polski Koncern

Very weak diversification

The 3 months correlation between Pepco and Polski is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Pepco Group BV and Polski Koncern Naftowy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polski Koncern Naftowy 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 Polski Koncern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polski Koncern Naftowy has no effect on the direction of Pepco Group i.e., Pepco Group and Polski Koncern go up and down completely randomly.

Pair Corralation between Pepco Group and Polski Koncern

Assuming the 90 days trading horizon Pepco Group BV is expected to generate 1.29 times more return on investment than Polski Koncern. However, Pepco Group is 1.29 times more volatile than Polski Koncern Naftowy. It trades about -0.1 of its potential returns per unit of risk. Polski Koncern Naftowy is currently generating about -0.17 per unit of risk. If you would invest  1,842  in Pepco Group BV on September 2, 2024 and sell it today you would lose (252.00) from holding Pepco Group BV or give up 13.68% of portfolio value over 90 days.

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

Pepco Group BV  vs.  Polski Koncern Naftowy

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 weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Polski Koncern Naftowy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Polski Koncern Naftowy has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Pepco Group and Polski Koncern

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

The idea behind Pepco Group BV and Polski Koncern Naftowy 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.