Correlation Between Optima Health and Argo Group

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

Diversification Opportunities for Optima Health and Argo Group

-0.11

Correlation Coefficient

Optima Health  Argo Group

Good diversification

The 3 months correlation between Optima and Argo is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Optima Health plc and Argo Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Argo Group Limited 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 Argo Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Argo Group Limited has no effect on the direction of Optima Health i.e., Optima Health and Argo Group go up and down completely randomly.

Pair Corralation between Optima Health and Argo Group

Assuming the 90 days trading horizon Optima Health plc is expected to generate 0.34 times more return on investment than Argo Group. However, Optima Health plc is 2.93 times less risky than Argo Group. It trades about 0.05 of its potential returns per unit of risk. Argo Group Limited is currently generating about -0.14 per unit of risk. If you would invest  15,100  in Optima Health plc on September 2, 2024 and sell it today you would earn a total of  450.00  from holding Optima Health plc or generate 2.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	72.73%
Values	Daily Returns

Optima Health plc  vs.  Argo Group Limited

Optima Health plc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Optima Health plc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

Argo Group Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Argo Group Limited 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 basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Optima Health and Argo Group

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

The idea behind Optima Health plc and Argo Group Limited 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.