Correlation Between OTP Bank and Aberforth Smaller

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Can any of the company-specific risk be diversified away by investing in both OTP Bank and Aberforth Smaller 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 Aberforth Smaller 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 Aberforth Smaller Companies, you can compare the effects of market volatilities on OTP Bank and Aberforth Smaller 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 Aberforth Smaller. Check out your portfolio center. Please also check ongoing floating volatility patterns of OTP Bank and Aberforth Smaller.

Diversification Opportunities for OTP Bank and Aberforth Smaller

-0.18
  Correlation Coefficient

Good diversification

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

Pair Corralation between OTP Bank and Aberforth Smaller

Assuming the 90 days trading horizon OTP Bank Nyrt is expected to generate 23.63 times more return on investment than Aberforth Smaller. However, OTP Bank is 23.63 times more volatile than Aberforth Smaller Companies. It trades about 0.1 of its potential returns per unit of risk. Aberforth Smaller Companies is currently generating about -0.07 per unit of risk. If you would invest  1,259,000  in OTP Bank Nyrt on September 2, 2024 and sell it today you would earn a total of  0.00  from holding OTP Bank Nyrt or generate 0.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

OTP Bank Nyrt  vs.  Aberforth Smaller Companies

 Performance 
       Timeline  
OTP Bank Nyrt 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in OTP Bank Nyrt are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, OTP Bank unveiled solid returns over the last few months and may actually be approaching a breakup point.
Aberforth Smaller 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Aberforth Smaller Companies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

OTP Bank and Aberforth Smaller Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with OTP Bank and Aberforth Smaller

The main advantage of trading using opposite OTP Bank and Aberforth Smaller positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OTP Bank position performs unexpectedly, Aberforth Smaller 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 Aberforth Smaller will offset losses from the drop in Aberforth Smaller's long position.
The idea behind OTP Bank Nyrt and Aberforth Smaller Companies 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 Global Correlations module to find global opportunities by holding instruments from different markets.

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