Correlation Between OTP Bank and Petronor

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Can any of the company-specific risk be diversified away by investing in both OTP Bank and Petronor 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 OTP Bank and Petronor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between OTP Bank Nyrt and Petronor EP, you can compare the effects of market volatilities on OTP Bank and Petronor 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 OTP Bank with a short position of Petronor. Check out your portfolio center. Please also check ongoing floating volatility patterns of OTP Bank and Petronor.

Diversification Opportunities for OTP Bank and Petronor

0.18
  Correlation Coefficient

Average diversification

The 3 months correlation between OTP and Petronor is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding OTP Bank Nyrt and Petronor EP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petronor EP and OTP Bank 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 OTP Bank Nyrt are associated (or correlated) with Petronor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petronor EP has no effect on the direction of OTP Bank i.e., OTP Bank and Petronor go up and down completely randomly.

Pair Corralation between OTP Bank and Petronor

Assuming the 90 days horizon OTP Bank Nyrt is expected to generate 5.58 times more return on investment than Petronor. However, OTP Bank is 5.58 times more volatile than Petronor EP. It trades about 0.09 of its potential returns per unit of risk. Petronor EP is currently generating about 0.02 per unit of risk. If you would invest  2,700  in OTP Bank Nyrt on December 29, 2023 and sell it today you would earn a total of  2,242  from holding OTP Bank Nyrt or generate 83.04% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy74.21%
ValuesDaily Returns

OTP Bank Nyrt  vs.  Petronor EP

 Performance 
       Timeline  
OTP Bank Nyrt 

Risk-Adjusted Performance

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High
Solid
Over the last 90 days OTP Bank Nyrt has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly uncertain fundamental drivers, OTP Bank reported solid returns over the last few months and may actually be approaching a breakup point.
Petronor EP 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Petronor EP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Petronor is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

OTP Bank and Petronor Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with OTP Bank and Petronor

The main advantage of trading using opposite OTP Bank and Petronor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OTP Bank position performs unexpectedly, Petronor 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 Petronor will offset losses from the drop in Petronor's long position.
The idea behind OTP Bank Nyrt and Petronor EP 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.

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