Correlation Between Athens General and Bank of Greece

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

By analyzing existing cross correlation between Athens General Composite and Bank of Greece, you can compare the effects of market volatilities on Athens General and Bank of Greece 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 Athens General with a short position of Bank of Greece. Check out your portfolio center. Please also check ongoing floating volatility patterns of Athens General and Bank of Greece.

Diversification Opportunities for Athens General and Bank of Greece

0.54

Correlation Coefficient

Athens General  Bank of Greece

Very weak diversification

The 3 months correlation between Athens and Bank is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Athens General Composite and Bank of Greece in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Greece and Athens General 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 Athens General Composite are associated (or correlated) with Bank of Greece. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Greece has no effect on the direction of Athens General i.e., Athens General and Bank of Greece go up and down completely randomly.

Pair Corralation between Athens General and Bank of Greece

Assuming the 90 days trading horizon Athens General is expected to generate 1.22 times less return on investment than Bank of Greece. But when comparing it to its historical volatility, Athens General Composite is 1.36 times less risky than Bank of Greece. It trades about 0.08 of its potential returns per unit of risk. Bank of Greece is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,365  in Bank of Greece on September 12, 2024 and sell it today you would earn a total of  60.00  from holding Bank of Greece or generate 4.4% return on investment over 90 days.

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

Athens General Composite  vs.  Bank of Greece

Pair Trading with Athens General and Bank of Greece

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

The idea behind Athens General Composite and Bank of Greece 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .