Correlation Between Polski Koncern and SOFTWARE MANSION

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

Diversification Opportunities for Polski Koncern and SOFTWARE MANSION

0.43

Correlation Coefficient

Polski Koncern  SOFTWARE MANSION

Very weak diversification

The 3 months correlation between Polski and SOFTWARE is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Polski Koncern Naftowy and SOFTWARE MANSION SPOLKA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOFTWARE MANSION SPOLKA 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 SOFTWARE MANSION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SOFTWARE MANSION SPOLKA has no effect on the direction of Polski Koncern i.e., Polski Koncern and SOFTWARE MANSION go up and down completely randomly.

Pair Corralation between Polski Koncern and SOFTWARE MANSION

Assuming the 90 days trading horizon Polski Koncern Naftowy is expected to generate 0.68 times more return on investment than SOFTWARE MANSION. However, Polski Koncern Naftowy is 1.47 times less risky than SOFTWARE MANSION. It trades about 0.19 of its potential returns per unit of risk. SOFTWARE MANSION SPOLKA is currently generating about 0.02 per unit of risk. If you would invest  5,122  in Polski Koncern Naftowy on November 28, 2024 and sell it today you would earn a total of  943.00  from holding Polski Koncern Naftowy or generate 18.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.28%
Values	Daily Returns

Polski Koncern Naftowy  vs.  SOFTWARE MANSION SPOLKA

Polski Koncern Naftowy

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Polski Koncern Naftowy are ranked lower than 14 (%) 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.

SOFTWARE MANSION SPOLKA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SOFTWARE MANSION SPOLKA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, SOFTWARE MANSION 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 Polski Koncern and SOFTWARE MANSION

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

The idea behind Polski Koncern Naftowy and SOFTWARE MANSION SPOLKA 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.