Correlation Between Bucharest BET-NG and Mecanica Rotes

Can any of the company-specific risk be diversified away by investing in both Bucharest BET-NG and Mecanica Rotes 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 Bucharest BET-NG and Mecanica Rotes into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bucharest BET-NG and Mecanica Rotes SA, you can compare the effects of market volatilities on Bucharest BET-NG and Mecanica Rotes 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 Bucharest BET-NG with a short position of Mecanica Rotes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bucharest BET-NG and Mecanica Rotes.

Diversification Opportunities for Bucharest BET-NG and Mecanica Rotes

0.0

Correlation Coefficient

Bucharest BET-NG  Mecanica Rotes

Pay attention - limited upside

The 3 months correlation between Bucharest and Mecanica is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Bucharest BET-NG and Mecanica Rotes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mecanica Rotes SA and Bucharest BET-NG 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 Bucharest BET-NG are associated (or correlated) with Mecanica Rotes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mecanica Rotes SA has no effect on the direction of Bucharest BET-NG i.e., Bucharest BET-NG and Mecanica Rotes go up and down completely randomly.

Pair Corralation between Bucharest BET-NG and Mecanica Rotes

If you would invest (100.00) in Mecanica Rotes SA on September 30, 2024 and sell it today you would earn a total of  100.00  from holding Mecanica Rotes SA or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Bucharest BET-NG  vs.  Mecanica Rotes SA

Pair Trading with Bucharest BET-NG and Mecanica Rotes

The main advantage of trading using opposite Bucharest BET-NG and Mecanica Rotes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bucharest BET-NG position performs unexpectedly, Mecanica Rotes 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 Mecanica Rotes will offset losses from the drop in Mecanica Rotes' long position.

The idea behind Bucharest BET-NG and Mecanica Rotes SA 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..