Correlation Between Optima Health and RTW Venture
Can any of the company-specific risk be diversified away by investing in both Optima Health and RTW Venture 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 Optima Health and RTW Venture into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Optima Health plc and RTW Venture Fund, you can compare the effects of market volatilities on Optima Health and RTW Venture 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 Optima Health with a short position of RTW Venture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Optima Health and RTW Venture.
Diversification Opportunities for Optima Health and RTW Venture
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Optima and RTW is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Optima Health plc and RTW Venture Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RTW Venture Fund and Optima Health 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 Optima Health plc are associated (or correlated) with RTW Venture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RTW Venture Fund has no effect on the direction of Optima Health i.e., Optima Health and RTW Venture go up and down completely randomly.
Pair Corralation between Optima Health and RTW Venture
Assuming the 90 days trading horizon Optima Health plc is expected to under-perform the RTW Venture. But the stock apears to be less risky and, when comparing its historical volatility, Optima Health plc is 1.43 times less risky than RTW Venture. The stock trades about -0.41 of its potential returns per unit of risk. The RTW Venture Fund is currently generating about -0.22 of returns per unit of risk over similar time horizon. If you would invest 154.00 in RTW Venture Fund on September 14, 2024 and sell it today you would lose (8.00) from holding RTW Venture Fund or give up 5.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Optima Health plc vs. RTW Venture Fund
Performance |
| Timeline |
| Optima Health plc |
| RTW Venture Fund |
Optima Health and RTW Venture Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Optima Health and RTW Venture
The main advantage of trading using opposite Optima Health and RTW Venture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Optima Health position performs unexpectedly, RTW Venture 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 RTW Venture will offset losses from the drop in RTW Venture's long position.| Optima Health vs. Toyota Motor Corp | Optima Health vs. SoftBank Group Corp | Optima Health vs. OTP Bank Nyrt | Optima Health vs. Hershey Co |
| RTW Venture vs. Ecclesiastical Insurance Office | RTW Venture vs. Central Asia Metals | RTW Venture vs. JB Hunt Transport | RTW Venture vs. Naked Wines plc |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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