Correlation Between BankInvest Optima and Prime Office

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

By analyzing existing cross correlation between BankInvest Optima 30 and Prime Office AS, you can compare the effects of market volatilities on BankInvest Optima and Prime Office 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 Prime Office. Check out your portfolio center. Please also check ongoing floating volatility patterns of BankInvest Optima and Prime Office.

Diversification Opportunities for BankInvest Optima and Prime Office

-0.37

Correlation Coefficient

BankInvest Optima  Prime Office

Very good diversification

The 3 months correlation between BankInvest and Prime is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding BankInvest Optima 30 and Prime Office AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prime Office AS 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 30 are associated (or correlated) with Prime Office. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prime Office AS has no effect on the direction of BankInvest Optima i.e., BankInvest Optima and Prime Office go up and down completely randomly.

Pair Corralation between BankInvest Optima and Prime Office

Assuming the 90 days trading horizon BankInvest Optima 30 is expected to generate 0.22 times more return on investment than Prime Office. However, BankInvest Optima 30 is 4.47 times less risky than Prime Office. It trades about -0.07 of its potential returns per unit of risk. Prime Office AS is currently generating about -0.07 per unit of risk. If you would invest  11,160  in BankInvest Optima 30 on September 23, 2024 and sell it today you would lose (55.00) from holding BankInvest Optima 30 or give up 0.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

BankInvest Optima 30  vs.  Prime Office AS

BankInvest Optima

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BankInvest Optima 30 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, BankInvest Optima is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Prime Office AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prime Office AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, Prime Office is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with BankInvest Optima and Prime Office

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

The idea behind BankInvest Optima 30 and Prime Office AS 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.