Correlation Between Bank Millennium and HM Inwest

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

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

Diversification Opportunities for Bank Millennium and HM Inwest

-0.33

Correlation Coefficient

Bank Millennium  HM Inwest

Very good diversification

The 3 months correlation between Bank and HMI is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Bank Millennium SA and HM Inwest SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HM Inwest SA and Bank Millennium 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 Bank Millennium SA are associated (or correlated) with HM Inwest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HM Inwest SA has no effect on the direction of Bank Millennium i.e., Bank Millennium and HM Inwest go up and down completely randomly.

Pair Corralation between Bank Millennium and HM Inwest

Assuming the 90 days trading horizon Bank Millennium is expected to generate 2.28 times less return on investment than HM Inwest. But when comparing it to its historical volatility, Bank Millennium SA is 1.45 times less risky than HM Inwest. It trades about 0.02 of its potential returns per unit of risk. HM Inwest SA is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  4,190  in HM Inwest SA on September 14, 2024 and sell it today you would earn a total of  420.00  from holding HM Inwest SA or generate 10.02% return on investment over 90 days.

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

Bank Millennium SA  vs.  HM Inwest SA

Bank Millennium SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank Millennium SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Bank Millennium is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

HM Inwest SA

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HM Inwest SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, HM Inwest reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Millennium and HM Inwest

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

The idea behind Bank Millennium SA and HM Inwest 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.