Correlation Between Opko Health and B Communications

Can any of the company-specific risk be diversified away by investing in both Opko Health and B Communications 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 Opko Health and B Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Opko Health and B Communications, you can compare the effects of market volatilities on Opko Health and B Communications 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 Opko Health with a short position of B Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Opko Health and B Communications.

Diversification Opportunities for Opko Health and B Communications

-0.1

Correlation Coefficient

Opko Health  B Communications

Good diversification

The 3 months correlation between Opko and BCOM is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Opko Health and B Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on B Communications and Opko Health 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 Opko Health are associated (or correlated) with B Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of B Communications has no effect on the direction of Opko Health i.e., Opko Health and B Communications go up and down completely randomly.

Pair Corralation between Opko Health and B Communications

Assuming the 90 days trading horizon Opko Health is expected to generate 21.29 times less return on investment than B Communications. In addition to that, Opko Health is 1.3 times more volatile than B Communications. It trades about 0.01 of its total potential returns per unit of risk. B Communications is currently generating about 0.3 per unit of volatility. If you would invest  130,000  in B Communications on October 27, 2024 and sell it today you would earn a total of  67,600  from holding B Communications or generate 52.0% return on investment over 90 days.

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

Opko Health  vs.  B Communications

Opko Health

Risk-Adjusted Performance

0 of 100

Very Weak

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

B Communications

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in B Communications are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, B Communications sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Opko Health and B Communications

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

The idea behind Opko Health and B Communications 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 Stocks Directory module to find actively traded stocks across global markets.