Correlation Between CEZ As and HM Inwest

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

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

Diversification Opportunities for CEZ As and HM Inwest

0.61

Correlation Coefficient

CEZ As  HM Inwest

Poor diversification

The 3 months correlation between CEZ and HMI is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding CEZ as 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 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 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 CEZ As i.e., CEZ As and HM Inwest go up and down completely randomly.

Pair Corralation between CEZ As and HM Inwest

Assuming the 90 days trading horizon CEZ As is expected to generate 5.28 times less return on investment than HM Inwest. But when comparing it to its historical volatility, CEZ as is 2.28 times less risky than HM Inwest. It trades about 0.05 of its potential returns per unit of risk. HM Inwest SA is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  822.00  in HM Inwest SA on August 30, 2024 and sell it today you would earn a total of  3,998  from holding HM Inwest SA or generate 486.37% return on investment over 90 days.

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

CEZ as  vs.  HM Inwest SA

CEZ as

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CEZ as are ranked lower than 8 (%) 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 December 2024.

HM Inwest SA

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HM Inwest SA are ranked lower than 11 (%) 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 CEZ As and HM Inwest

The main advantage of trading using opposite CEZ As and HM Inwest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CEZ As 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 CEZ as 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.