Correlation Between CEZ As and Betacom SA

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

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

Diversification Opportunities for CEZ As and Betacom SA

-0.52

Correlation Coefficient

CEZ As  Betacom SA

Excellent diversification

The 3 months correlation between CEZ and Betacom is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding CEZ as and Betacom SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Betacom 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 Betacom SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Betacom SA has no effect on the direction of CEZ As i.e., CEZ As and Betacom SA go up and down completely randomly.

Pair Corralation between CEZ As and Betacom SA

Assuming the 90 days trading horizon CEZ as is expected to generate 0.75 times more return on investment than Betacom SA. However, CEZ as is 1.34 times less risky than Betacom SA. It trades about 0.09 of its potential returns per unit of risk. Betacom SA is currently generating about -0.05 per unit of risk. If you would invest  14,810  in CEZ as on September 5, 2024 and sell it today you would earn a total of  1,410  from holding CEZ as or generate 9.52% return on investment over 90 days.

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

CEZ as  vs.  Betacom SA

CEZ as

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CEZ as are ranked lower than 7 (%) 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.

Betacom SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Betacom SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with CEZ As and Betacom SA

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

The idea behind CEZ as and Betacom 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.