Correlation Between Expat Poland and Expat Romania

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

By analyzing existing cross correlation between Expat Poland WIG20 and Expat Romania BET, you can compare the effects of market volatilities on Expat Poland and Expat Romania 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 Expat Poland with a short position of Expat Romania. Check out your portfolio center. Please also check ongoing floating volatility patterns of Expat Poland and Expat Romania.

Diversification Opportunities for Expat Poland and Expat Romania

0.32

Correlation Coefficient

Expat Poland  Expat Romania

Weak diversification

The 3 months correlation between Expat and Expat is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Expat Poland WIG20 and Expat Romania BET in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Expat Romania BET and Expat Poland 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 Expat Poland WIG20 are associated (or correlated) with Expat Romania. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Expat Romania BET has no effect on the direction of Expat Poland i.e., Expat Poland and Expat Romania go up and down completely randomly.

Pair Corralation between Expat Poland and Expat Romania

Assuming the 90 days horizon Expat Poland WIG20 is expected to generate 2.66 times more return on investment than Expat Romania. However, Expat Poland is 2.66 times more volatile than Expat Romania BET. It trades about 0.02 of its potential returns per unit of risk. Expat Romania BET is currently generating about -0.02 per unit of risk. If you would invest  60.00  in Expat Poland WIG20 on September 16, 2024 and sell it today you would earn a total of  1.00  from holding Expat Poland WIG20 or generate 1.67% return on investment over 90 days.

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

Expat Poland WIG20  vs.  Expat Romania BET

Expat Poland WIG20

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Expat Poland WIG20 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Expat Poland is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Expat Romania BET

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Expat Romania BET has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Expat Romania is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Expat Poland and Expat Romania

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

The idea behind Expat Poland WIG20 and Expat Romania BET 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.