Correlation Between MBank SA and Bank Ochrony

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

By analyzing existing cross correlation between mBank SA and Bank Ochrony rodowiska, you can compare the effects of market volatilities on MBank SA and Bank Ochrony 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 MBank SA with a short position of Bank Ochrony. Check out your portfolio center. Please also check ongoing floating volatility patterns of MBank SA and Bank Ochrony.

Diversification Opportunities for MBank SA and Bank Ochrony

0.6

Correlation Coefficient

MBank SA  Bank Ochrony

Poor diversification

The 3 months correlation between MBank and Bank is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding mBank SA and Bank Ochrony rodowiska in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Ochrony rodowiska and MBank SA 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 mBank SA are associated (or correlated) with Bank Ochrony. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Ochrony rodowiska has no effect on the direction of MBank SA i.e., MBank SA and Bank Ochrony go up and down completely randomly.

Pair Corralation between MBank SA and Bank Ochrony

Assuming the 90 days trading horizon mBank SA is expected to generate 1.63 times more return on investment than Bank Ochrony. However, MBank SA is 1.63 times more volatile than Bank Ochrony rodowiska. It trades about -0.01 of its potential returns per unit of risk. Bank Ochrony rodowiska is currently generating about -0.04 per unit of risk. If you would invest  86,860  in mBank SA on April 24, 2025 and sell it today you would lose (1,980) from holding mBank SA or give up 2.28% of portfolio value over 90 days.

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

mBank SA  vs.  Bank Ochrony rodowiska

mBank SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days mBank SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, MBank SA is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Bank Ochrony rodowiska

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bank Ochrony rodowiska has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Bank Ochrony is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with MBank SA and Bank Ochrony

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

The idea behind mBank SA and Bank Ochrony rodowiska 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.