Correlation Between BIST Electricity and Athens General

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

By analyzing existing cross correlation between BIST Electricity and Athens General Composite, you can compare the effects of market volatilities on BIST Electricity and Athens General 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 BIST Electricity with a short position of Athens General. Check out your portfolio center. Please also check ongoing floating volatility patterns of BIST Electricity and Athens General.

Diversification Opportunities for BIST Electricity and Athens General

0.21

Correlation Coefficient

BIST Electricity  Athens General

Modest diversification

The 3 months correlation between BIST and Athens is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding BIST Electricity and Athens General Composite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Athens General Composite and BIST Electricity 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 BIST Electricity are associated (or correlated) with Athens General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Athens General Composite has no effect on the direction of BIST Electricity i.e., BIST Electricity and Athens General go up and down completely randomly.

Pair Corralation between BIST Electricity and Athens General

Assuming the 90 days trading horizon BIST Electricity is expected to under-perform the Athens General. In addition to that, BIST Electricity is 2.02 times more volatile than Athens General Composite. It trades about -0.04 of its total potential returns per unit of risk. Athens General Composite is currently generating about -0.04 per unit of volatility. If you would invest  143,119  in Athens General Composite on August 30, 2024 and sell it today you would lose (2,756) from holding Athens General Composite or give up 1.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

BIST Electricity  vs.  Athens General Composite

Pair Trading with BIST Electricity and Athens General

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

The idea behind BIST Electricity and Athens General Composite 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.