Correlation Between Settlebank and OptiPharm
Can any of the company-specific risk be diversified away by investing in both Settlebank and OptiPharm 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 Settlebank and OptiPharm into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Settlebank and OptiPharm Co, you can compare the effects of market volatilities on Settlebank and OptiPharm 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 Settlebank with a short position of OptiPharm. Check out your portfolio center. Please also check ongoing floating volatility patterns of Settlebank and OptiPharm.
Diversification Opportunities for Settlebank and OptiPharm
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Settlebank and OptiPharm is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Settlebank and OptiPharm Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OptiPharm and Settlebank 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 Settlebank are associated (or correlated) with OptiPharm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OptiPharm has no effect on the direction of Settlebank i.e., Settlebank and OptiPharm go up and down completely randomly.
Pair Corralation between Settlebank and OptiPharm
Assuming the 90 days trading horizon Settlebank is expected to generate 3.17 times more return on investment than OptiPharm. However, Settlebank is 3.17 times more volatile than OptiPharm Co. It trades about -0.01 of its potential returns per unit of risk. OptiPharm Co is currently generating about -0.14 per unit of risk. If you would invest 1,929,817 in Settlebank on September 4, 2024 and sell it today you would lose (490,817) from holding Settlebank or give up 25.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.58% |
| Values | Daily Returns |
Settlebank vs. OptiPharm Co
Performance |
| Timeline |
| Settlebank |
| OptiPharm |
Settlebank and OptiPharm Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Settlebank and OptiPharm
The main advantage of trading using opposite Settlebank and OptiPharm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Settlebank position performs unexpectedly, OptiPharm 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 OptiPharm will offset losses from the drop in OptiPharm's long position.| Settlebank vs. NH Investment Securities | Settlebank vs. Samyung Trading Co | Settlebank vs. Clean Science co | Settlebank vs. EBEST Investment Securities |
| OptiPharm vs. CG Hi Tech | OptiPharm vs. Settlebank | OptiPharm vs. Nable Communications | OptiPharm vs. Lotte Non Life Insurance |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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