Correlation Between Karelia Tobacco and Optronics Technologies

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

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

Diversification Opportunities for Karelia Tobacco and Optronics Technologies

0.23

Correlation Coefficient

Karelia Tobacco  Optronics Technologies

Modest diversification

The 3 months correlation between Karelia and Optronics is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Karelia Tobacco and Optronics Technologies SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Optronics Technologies and Karelia Tobacco 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 Karelia Tobacco 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 Karelia Tobacco i.e., Karelia Tobacco and Optronics Technologies go up and down completely randomly.

Pair Corralation between Karelia Tobacco and Optronics Technologies

Assuming the 90 days trading horizon Karelia Tobacco is expected to generate 9.55 times more return on investment than Optronics Technologies. However, Karelia Tobacco is 9.55 times more volatile than Optronics Technologies SA. It trades about 0.06 of its potential returns per unit of risk. Optronics Technologies SA is currently generating about 0.0 per unit of risk. If you would invest  32,600  in Karelia Tobacco on September 12, 2024 and sell it today you would earn a total of  1,400  from holding Karelia Tobacco or generate 4.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Karelia Tobacco  vs.  Optronics Technologies SA

Karelia Tobacco

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Karelia Tobacco are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Karelia Tobacco is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Optronics Technologies

Risk-Adjusted Performance

0 of 100

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 somewhat strong basic indicators, Optronics Technologies is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Karelia Tobacco and Optronics Technologies

The main advantage of trading using opposite Karelia Tobacco and Optronics Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Karelia Tobacco 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 Karelia Tobacco 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.