Correlation Between Bank Polska and Bank Millennium

Can any of the company-specific risk be diversified away by investing in both Bank Polska 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 Bank Polska and Bank Millennium 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 Bank Millennium SA, you can compare the effects of market volatilities on Bank Polska 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 Bank Polska with a short position of Bank Millennium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Polska and Bank Millennium.

Diversification Opportunities for Bank Polska and Bank Millennium

0.94

Correlation Coefficient

Bank Polska  Bank Millennium

Almost no diversification

The 3 months correlation between Bank and Bank is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Bank Polska Kasa 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 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 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 Bank Polska i.e., Bank Polska and Bank Millennium go up and down completely randomly.

Pair Corralation between Bank Polska and Bank Millennium

Assuming the 90 days trading horizon Bank Polska is expected to generate 1.63 times less return on investment than Bank Millennium. But when comparing it to its historical volatility, Bank Polska Kasa is 1.13 times less risky than Bank Millennium. It trades about 0.19 of its potential returns per unit of risk. Bank Millennium SA is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  822.00  in Bank Millennium SA on November 28, 2024 and sell it today you would earn a total of  318.00  from holding Bank Millennium SA or generate 38.69% return on investment over 90 days.

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

Bank Polska Kasa  vs.  Bank Millennium SA

Bank Polska Kasa

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Polska Kasa are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Bank Polska reported solid returns over the last few months and may actually be approaching a breakup point.

Bank Millennium SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Millennium SA are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Bank Millennium reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Polska and Bank Millennium

The main advantage of trading using opposite Bank Polska and Bank Millennium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Polska 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 Bank Polska Kasa 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.