Correlation Between BankInvest Optima and Sparinvest INDEX

Can any of the company-specific risk be diversified away by investing in both BankInvest Optima and Sparinvest INDEX 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 Sparinvest INDEX 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 Sparinvest INDEX Globale, you can compare the effects of market volatilities on BankInvest Optima and Sparinvest INDEX 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 Sparinvest INDEX. Check out your portfolio center. Please also check ongoing floating volatility patterns of BankInvest Optima and Sparinvest INDEX.

Diversification Opportunities for BankInvest Optima and Sparinvest INDEX

0.21

Correlation Coefficient

BankInvest Optima  Sparinvest INDEX

Modest diversification

The 3 months correlation between BankInvest and Sparinvest is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding BankInvest Optima 30 and Sparinvest INDEX Globale in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparinvest INDEX Globale 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 Sparinvest INDEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparinvest INDEX Globale has no effect on the direction of BankInvest Optima i.e., BankInvest Optima and Sparinvest INDEX go up and down completely randomly.

Pair Corralation between BankInvest Optima and Sparinvest INDEX

Assuming the 90 days trading horizon BankInvest Optima 30 is expected to under-perform the Sparinvest INDEX. But the stock apears to be less risky and, when comparing its historical volatility, BankInvest Optima 30 is 1.25 times less risky than Sparinvest INDEX. The stock trades about -0.16 of its potential returns per unit of risk. The Sparinvest INDEX Globale is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  13,319  in Sparinvest INDEX Globale on December 29, 2024 and sell it today you would earn a total of  336.00  from holding Sparinvest INDEX Globale or generate 2.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	92.19%
Values	Daily Returns

BankInvest Optima 30  vs.  Sparinvest INDEX Globale

BankInvest Optima

Risk-Adjusted Performance

Very Weak

Over the last 90 days BankInvest Optima 30 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.

Sparinvest INDEX Globale

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sparinvest INDEX Globale are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy basic indicators, Sparinvest INDEX is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with BankInvest Optima and Sparinvest INDEX

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

The idea behind BankInvest Optima 30 and Sparinvest INDEX Globale 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.