Correlation Between WIG 30 and ULMA Construccion

Can any of the company-specific risk be diversified away by investing in both WIG 30 and ULMA Construccion 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 WIG 30 and ULMA Construccion into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between WIG 30 and ULMA Construccion Polska, you can compare the effects of market volatilities on WIG 30 and ULMA Construccion 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 WIG 30 with a short position of ULMA Construccion. Check out your portfolio center. Please also check ongoing floating volatility patterns of WIG 30 and ULMA Construccion.

Diversification Opportunities for WIG 30 and ULMA Construccion

-0.7

Correlation Coefficient

WIG 30  ULMA Construccion

Excellent diversification

The 3 months correlation between WIG and ULMA is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding WIG 30 and ULMA Construccion Polska in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ULMA Construccion Polska and WIG 30 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 WIG 30 are associated (or correlated) with ULMA Construccion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ULMA Construccion Polska has no effect on the direction of WIG 30 i.e., WIG 30 and ULMA Construccion go up and down completely randomly.

Pair Corralation between WIG 30 and ULMA Construccion

Assuming the 90 days trading horizon WIG 30 is expected to generate 0.71 times more return on investment than ULMA Construccion. However, WIG 30 is 1.41 times less risky than ULMA Construccion. It trades about 0.06 of its potential returns per unit of risk. ULMA Construccion Polska is currently generating about 0.01 per unit of risk. If you would invest  267,628  in WIG 30 on December 3, 2024 and sell it today you would earn a total of  62,881  from holding WIG 30 or generate 23.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.69%
Values	Daily Returns

WIG 30  vs.  ULMA Construccion Polska

Pair Trading with WIG 30 and ULMA Construccion

The main advantage of trading using opposite WIG 30 and ULMA Construccion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WIG 30 position performs unexpectedly, ULMA Construccion 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 ULMA Construccion will offset losses from the drop in ULMA Construccion's long position.

The idea behind WIG 30 and ULMA Construccion Polska 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.