Correlation Between Polski Koncern and CEZ As

Can any of the company-specific risk be diversified away by investing in both Polski Koncern and CEZ As 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 Polski Koncern and CEZ As into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Polski Koncern Naftowy and CEZ as, you can compare the effects of market volatilities on Polski Koncern and CEZ As 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 Polski Koncern with a short position of CEZ As. Check out your portfolio center. Please also check ongoing floating volatility patterns of Polski Koncern and CEZ As.

Diversification Opportunities for Polski Koncern and CEZ As

0.62

Correlation Coefficient

Polski Koncern  CEZ As

Poor diversification

The 3 months correlation between Polski and CEZ is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Polski Koncern Naftowy and CEZ as in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CEZ as and Polski Koncern 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 Polski Koncern Naftowy are associated (or correlated) with CEZ As. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CEZ as has no effect on the direction of Polski Koncern i.e., Polski Koncern and CEZ As go up and down completely randomly.

Pair Corralation between Polski Koncern and CEZ As

Assuming the 90 days trading horizon Polski Koncern Naftowy is expected to generate 0.66 times more return on investment than CEZ As. However, Polski Koncern Naftowy is 1.51 times less risky than CEZ As. It trades about 0.49 of its potential returns per unit of risk. CEZ as is currently generating about 0.14 per unit of risk. If you would invest  4,720  in Polski Koncern Naftowy on December 30, 2024 and sell it today you would earn a total of  2,184  from holding Polski Koncern Naftowy or generate 46.27% return on investment over 90 days.

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

Polski Koncern Naftowy  vs.  CEZ as

Polski Koncern Naftowy

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Polski Koncern Naftowy are ranked lower than 38 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Polski Koncern reported solid returns over the last few months and may actually be approaching a breakup point.

CEZ as

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CEZ as are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, CEZ As reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Polski Koncern and CEZ As

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

The idea behind Polski Koncern Naftowy and CEZ as 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.