Correlation Between CEZ As and Asseco Poland

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

By analyzing existing cross correlation between CEZ as and Asseco Poland SA, you can compare the effects of market volatilities on CEZ As and Asseco Poland 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 CEZ As with a short position of Asseco Poland. Check out your portfolio center. Please also check ongoing floating volatility patterns of CEZ As and Asseco Poland.

Diversification Opportunities for CEZ As and Asseco Poland

0.44

Correlation Coefficient

CEZ As  Asseco Poland

Very weak diversification

The 3 months correlation between CEZ and Asseco is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding CEZ as and Asseco Poland SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asseco Poland SA and CEZ As 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 CEZ as are associated (or correlated) with Asseco Poland. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asseco Poland SA has no effect on the direction of CEZ As i.e., CEZ As and Asseco Poland go up and down completely randomly.

Pair Corralation between CEZ As and Asseco Poland

Assuming the 90 days trading horizon CEZ as is expected to generate 1.22 times more return on investment than Asseco Poland. However, CEZ As is 1.22 times more volatile than Asseco Poland SA. It trades about 0.11 of its potential returns per unit of risk. Asseco Poland SA is currently generating about 0.1 per unit of risk. If you would invest  14,520  in CEZ as on September 28, 2024 and sell it today you would earn a total of  1,660  from holding CEZ as or generate 11.43% return on investment over 90 days.

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

CEZ as  vs.  Asseco Poland SA

CEZ as

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CEZ as are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, CEZ As may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Asseco Poland SA

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Asseco Poland SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Asseco Poland may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with CEZ As and Asseco Poland

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

The idea behind CEZ as and Asseco Poland 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.