Correlation Between Optima Health and Cembra Money

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

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

Diversification Opportunities for Optima Health and Cembra Money

-0.59

Correlation Coefficient

Optima Health  Cembra Money

Excellent diversification

The 3 months correlation between Optima and Cembra is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Optima Health plc and Cembra Money Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cembra Money Bank and Optima 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 Optima Health plc are associated (or correlated) with Cembra Money. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cembra Money Bank has no effect on the direction of Optima Health i.e., Optima Health and Cembra Money go up and down completely randomly.

Pair Corralation between Optima Health and Cembra Money

Assuming the 90 days trading horizon Optima Health plc is expected to under-perform the Cembra Money. But the stock apears to be less risky and, when comparing its historical volatility, Optima Health plc is 1.02 times less risky than Cembra Money. The stock trades about -0.08 of its potential returns per unit of risk. The Cembra Money Bank is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  7,181  in Cembra Money Bank on October 12, 2024 and sell it today you would earn a total of  1,399  from holding Cembra Money Bank or generate 19.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	14.8%
Values	Daily Returns

Optima Health plc  vs.  Cembra Money Bank

Optima Health plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Optima Health plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Cembra Money Bank

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cembra Money Bank are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Cembra Money may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Optima Health and Cembra Money

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

The idea behind Optima Health plc and Cembra Money Bank 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.