Is there a Correlation Between Covid-19 Cases and Daily Changes of CROBEX & SBITOP?

For today we decided to look if there is any correlation of daily reported cases and daily performance of CROBEX & SBITOP.

On Friday, Croatia reported a 4-digit number for the first time since the beginning of the pandemic in new daily Covid-19 cases. To be specific, 1,131 Covid-19 cases were recorded, which represents 20% of daily tested population. So far, Croatia has borne the pandemic quite well, as the number of cases have until now been tamed. Given that less than a month ago Croatia was recording only low triple digit number of daily cases this could be seen as quite a high increase in a short period of time. Therefore, for today we decided to look if there is any correlation of daily reported cases and daily performance of CROBEX.

Number of Daily Covid-19 Cases vs Daily Changes of CROBEX

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Source: Bloomberg, InterCapital Research

In the graph above you can see the daily movement of CROBEX and daily number of new Covid-19 cases. If we were to look at their correlation since the first Covid-19 case in Croatia (25 February), we reach a coefficient of correlation of 0.052. Note that for simplicity reasons, weekends and non-working days were disregarded. Such a coefficient of correlation indicates no correlation between the two. If we were to look at the correlation between the daily difference of new cases, we reach an even lower coefficient of correlation.

Further, if we were to look at Slovenia, we reach the same conclusion. There is no correlation between the number of cases in Slovenia and the daily performance of SBITOP.

Such finding does not surprise us given that equities are anticipative in their nature. Therefore, an increase in number of cases should not necessarily lead to a daily decrease of the main index as such increases tend to be priced in. However, we note that a high increase in cases could lead to a higher uncertainty (risk) of further restrictions which in turn would mean lower than expected future cashflows and therefore a drop in equities.

Number of Daily Covid-19 Cases vs Daily Changes of SBITOP