Correlation Between Opko Health and Direct Capital

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

By analyzing existing cross correlation between Opko Health and Direct Capital Investments, you can compare the effects of market volatilities on Opko Health and Direct Capital 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 Direct Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Opko Health and Direct Capital.

Diversification Opportunities for Opko Health and Direct Capital

-0.19

Correlation Coefficient

Opko Health  Direct Capital

Good diversification

The 3 months correlation between Opko and Direct is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Opko Health and Direct Capital Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direct Capital Inves 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 Direct Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direct Capital Inves has no effect on the direction of Opko Health i.e., Opko Health and Direct Capital go up and down completely randomly.

Pair Corralation between Opko Health and Direct Capital

Assuming the 90 days trading horizon Opko Health is expected to under-perform the Direct Capital. But the stock apears to be less risky and, when comparing its historical volatility, Opko Health is 2.25 times less risky than Direct Capital. The stock trades about -0.01 of its potential returns per unit of risk. The Direct Capital Investments is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  79,730  in Direct Capital Investments on October 11, 2024 and sell it today you would earn a total of  4,270  from holding Direct Capital Investments or generate 5.36% 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.  Direct Capital Investments

Opko Health

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Opko Health are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Direct Capital Inves

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Direct Capital Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Opko Health and Direct Capital

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

The idea behind Opko Health and Direct Capital Investments 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.