CROBEX Financial Statements From 2010 to 2024
Pair Trading with CROBEX
One of the main advantages of trading using pair correlations is that every trade hedges away some risk. Because there are two separate transactions required, even if CROBEX position performs unexpectedly, the other equity 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 CROBEX will appreciate offsetting losses from the drop in the long position's value.The ability to find closely correlated positions to CROBEX could be a great tool in your tax-loss harvesting strategies, allowing investors a quick way to find a similar-enough asset to replace CROBEX when you sell it. If you don't do this, your portfolio allocation will be skewed against your target asset allocation. So, investors can't just sell and buy back CROBEX - that would be a violation of the tax code under the "wash sale" rule, and this is why you need to find a similar enough asset and use the proceeds from selling CROBEX to buy it.
The correlation of CROBEX is a statistical measure of how it moves in relation to other instruments. This measure is expressed in what is known as the correlation coefficient, which ranges between -1 and +1. A perfect positive correlation (i.e., a correlation coefficient of +1) implies that as CROBEX moves, either up or down, the other security will move in the same direction. Alternatively, perfect negative correlation means that if CROBEX moves in either direction, the perfectly negatively correlated security will move in the opposite direction. If the correlation is 0, the equities are not correlated; they are entirely random. A correlation greater than 0.8 is generally described as strong, whereas a correlation less than 0.5 is generally considered weak.
Correlation analysis and pair trading evaluation for CROBEX can also be used as hedging techniques within a particular sector or industry or even over random equities to generate a better risk-adjusted return on your portfolios.Check out Trending Equities to better understand how to build diversified portfolios. Also, note that the market value of any index could be tightly coupled with the direction of predictive economic indicators such as signals in interest. You can also try the Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.