Correlation Between Bank Polska and MCI Management

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

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

Diversification Opportunities for Bank Polska and MCI Management

0.04

Correlation Coefficient

Bank Polska  MCI Management

Significant diversification

The 3 months correlation between Bank and MCI is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Bank Polska Kasa and MCI Management SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MCI Management SA and Bank Polska 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 Bank Polska Kasa are associated (or correlated) with MCI Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MCI Management SA has no effect on the direction of Bank Polska i.e., Bank Polska and MCI Management go up and down completely randomly.

Pair Corralation between Bank Polska and MCI Management

Assuming the 90 days trading horizon Bank Polska Kasa is expected to generate 1.73 times more return on investment than MCI Management. However, Bank Polska is 1.73 times more volatile than MCI Management SA. It trades about -0.11 of its potential returns per unit of risk. MCI Management SA is currently generating about -0.21 per unit of risk. If you would invest  15,360  in Bank Polska Kasa on September 12, 2024 and sell it today you would lose (800.00) from holding Bank Polska Kasa or give up 5.21% of portfolio value over 90 days.

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

Bank Polska Kasa  vs.  MCI Management SA

Bank Polska Kasa

Risk-Adjusted Performance

0 of 100

Very Weak

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

MCI Management SA

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MCI Management SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, MCI Management 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 Bank Polska and MCI Management

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

The idea behind Bank Polska Kasa and MCI Management 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.