Correlation Between Expat Poland and Expat Serbia

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

By analyzing existing cross correlation between Expat Poland WIG20 and Expat Serbia Belex15, you can compare the effects of market volatilities on Expat Poland and Expat Serbia 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 Expat Poland with a short position of Expat Serbia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Expat Poland and Expat Serbia.

Diversification Opportunities for Expat Poland and Expat Serbia

0.14

Correlation Coefficient

Expat Poland  Expat Serbia

Average diversification

The 3 months correlation between Expat and Expat is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Expat Poland WIG20 and Expat Serbia Belex15 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Expat Serbia Belex15 and Expat Poland 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 Expat Poland WIG20 are associated (or correlated) with Expat Serbia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Expat Serbia Belex15 has no effect on the direction of Expat Poland i.e., Expat Poland and Expat Serbia go up and down completely randomly.

Pair Corralation between Expat Poland and Expat Serbia

Assuming the 90 days horizon Expat Poland WIG20 is expected to generate 1.72 times more return on investment than Expat Serbia. However, Expat Poland is 1.72 times more volatile than Expat Serbia Belex15. It trades about 0.01 of its potential returns per unit of risk. Expat Serbia Belex15 is currently generating about 0.0 per unit of risk. If you would invest  62.00  in Expat Poland WIG20 on September 4, 2024 and sell it today you would lose (2.00) from holding Expat Poland WIG20 or give up 3.23% of portfolio value over 90 days.

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

Expat Poland WIG20  vs.  Expat Serbia Belex15

Expat Poland WIG20

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Expat Poland WIG20 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Expat Poland is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Expat Serbia Belex15

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Expat Serbia Belex15 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Expat Serbia is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Expat Poland and Expat Serbia

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

The idea behind Expat Poland WIG20 and Expat Serbia Belex15 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.