Correlation Between Centrum Finansowe and LPP SA

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

By analyzing existing cross correlation between Centrum Finansowe Banku and LPP SA, you can compare the effects of market volatilities on Centrum Finansowe and LPP 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 Centrum Finansowe with a short position of LPP SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Centrum Finansowe and LPP SA.

Diversification Opportunities for Centrum Finansowe and LPP SA

0.08

Correlation Coefficient

Centrum Finansowe  LPP SA

Significant diversification

The 3 months correlation between Centrum and LPP is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Centrum Finansowe Banku and LPP SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LPP SA and Centrum Finansowe 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 Centrum Finansowe Banku are associated (or correlated) with LPP SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LPP SA has no effect on the direction of Centrum Finansowe i.e., Centrum Finansowe and LPP SA go up and down completely randomly.

Pair Corralation between Centrum Finansowe and LPP SA

Assuming the 90 days trading horizon Centrum Finansowe Banku is expected to generate 1.31 times more return on investment than LPP SA. However, Centrum Finansowe is 1.31 times more volatile than LPP SA. It trades about 0.06 of its potential returns per unit of risk. LPP SA is currently generating about 0.03 per unit of risk. If you would invest  530.00  in Centrum Finansowe Banku on September 28, 2024 and sell it today you would earn a total of  40.00  from holding Centrum Finansowe Banku or generate 7.55% return on investment over 90 days.

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

Centrum Finansowe Banku  vs.  LPP SA

Centrum Finansowe Banku

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Centrum Finansowe Banku are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Centrum Finansowe may actually be approaching a critical reversion point that can send shares even higher in January 2025.

LPP SA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in LPP SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, LPP SA is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Centrum Finansowe and LPP SA

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

The idea behind Centrum Finansowe Banku and LPP 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.

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.