Correlation Between BankInvest Optima and Laan Spar

Can any of the company-specific risk be diversified away by investing in both BankInvest Optima and Laan Spar 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 BankInvest Optima and Laan Spar into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BankInvest Optima 10 and Laan Spar Bank, you can compare the effects of market volatilities on BankInvest Optima and Laan Spar 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 BankInvest Optima with a short position of Laan Spar. Check out your portfolio center. Please also check ongoing floating volatility patterns of BankInvest Optima and Laan Spar.

Diversification Opportunities for BankInvest Optima and Laan Spar

-0.21

Correlation Coefficient

BankInvest Optima  Laan Spar

Very good diversification

The 3 months correlation between BankInvest and Laan is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding BankInvest Optima 10 and Laan Spar Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laan Spar Bank and BankInvest Optima 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 BankInvest Optima 10 are associated (or correlated) with Laan Spar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Laan Spar Bank has no effect on the direction of BankInvest Optima i.e., BankInvest Optima and Laan Spar go up and down completely randomly.

Pair Corralation between BankInvest Optima and Laan Spar

Assuming the 90 days trading horizon BankInvest Optima 10 is expected to under-perform the Laan Spar. But the stock apears to be less risky and, when comparing its historical volatility, BankInvest Optima 10 is 3.67 times less risky than Laan Spar. The stock trades about -0.08 of its potential returns per unit of risk. The Laan Spar Bank is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  69,500  in Laan Spar Bank on December 25, 2024 and sell it today you would earn a total of  8,500  from holding Laan Spar Bank or generate 12.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

BankInvest Optima 10  vs.  Laan Spar Bank

BankInvest Optima

Risk-Adjusted Performance

Very Weak

Over the last 90 days BankInvest Optima 10 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, BankInvest Optima is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Laan Spar Bank

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Laan Spar Bank are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Laan Spar may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with BankInvest Optima and Laan Spar

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

The idea behind BankInvest Optima 10 and Laan Spar Bank 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.