Correlation Between Optima Health and Scandic Hotels

Can any of the company-specific risk be diversified away by investing in both Optima Health and Scandic Hotels 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 Scandic Hotels 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 Scandic Hotels Group, you can compare the effects of market volatilities on Optima Health and Scandic Hotels 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 Scandic Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Optima Health and Scandic Hotels.

Diversification Opportunities for Optima Health and Scandic Hotels

0.12

Correlation Coefficient

Optima Health  Scandic Hotels

Average diversification

The 3 months correlation between Optima and Scandic is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Optima Health plc and Scandic Hotels Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandic Hotels Group 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 Scandic Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scandic Hotels Group has no effect on the direction of Optima Health i.e., Optima Health and Scandic Hotels go up and down completely randomly.

Pair Corralation between Optima Health and Scandic Hotels

Assuming the 90 days trading horizon Optima Health plc is expected to under-perform the Scandic Hotels. But the stock apears to be less risky and, when comparing its historical volatility, Optima Health plc is 1.51 times less risky than Scandic Hotels. The stock trades about -0.46 of its potential returns per unit of risk. The Scandic Hotels Group is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  6,488  in Scandic Hotels Group on September 29, 2024 and sell it today you would earn a total of  327.00  from holding Scandic Hotels Group or generate 5.04% return on investment over 90 days.

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

Optima Health plc  vs.  Scandic Hotels Group

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 rather sound technical and fundamental indicators, Optima Health is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Scandic Hotels Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Scandic Hotels Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Scandic Hotels is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Optima Health and Scandic Hotels

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

The idea behind Optima Health plc and Scandic Hotels Group 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.