Correlation Between Interlife General and Optronics Technologies

Can any of the company-specific risk be diversified away by investing in both Interlife General and Optronics Technologies 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 Interlife General and Optronics Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Interlife General Insurance and Optronics Technologies SA, you can compare the effects of market volatilities on Interlife General and Optronics Technologies 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 Interlife General with a short position of Optronics Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Interlife General and Optronics Technologies.

Diversification Opportunities for Interlife General and Optronics Technologies

-0.38

Correlation Coefficient

Interlife General  Optronics Technologies

Very good diversification

The 3 months correlation between Interlife and Optronics is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Interlife General Insurance and Optronics Technologies SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Optronics Technologies and Interlife General 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 Interlife General Insurance are associated (or correlated) with Optronics Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Optronics Technologies has no effect on the direction of Interlife General i.e., Interlife General and Optronics Technologies go up and down completely randomly.

Pair Corralation between Interlife General and Optronics Technologies

Assuming the 90 days trading horizon Interlife General Insurance is expected to generate 1.65 times more return on investment than Optronics Technologies. However, Interlife General is 1.65 times more volatile than Optronics Technologies SA. It trades about 0.14 of its potential returns per unit of risk. Optronics Technologies SA is currently generating about -0.13 per unit of risk. If you would invest  436.00  in Interlife General Insurance on December 2, 2024 and sell it today you would earn a total of  55.00  from holding Interlife General Insurance or generate 12.61% return on investment over 90 days.

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

Interlife General Insurance  vs.  Optronics Technologies SA

Interlife General

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Interlife General Insurance are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Interlife General sustained solid returns over the last few months and may actually be approaching a breakup point.

Optronics Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Optronics Technologies SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Interlife General and Optronics Technologies

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

The idea behind Interlife General Insurance and Optronics Technologies SA 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.