Correlation Between Optima Health and GlobalData PLC

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

Diversification Opportunities for Optima Health and GlobalData PLC

0.22

Correlation Coefficient

Optima Health  GlobalData PLC

Modest diversification

The 3 months correlation between Optima and GlobalData is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Optima Health plc and GlobalData PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GlobalData PLC 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 GlobalData PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GlobalData PLC has no effect on the direction of Optima Health i.e., Optima Health and GlobalData PLC go up and down completely randomly.

Pair Corralation between Optima Health and GlobalData PLC

Assuming the 90 days trading horizon Optima Health plc is expected to generate 0.86 times more return on investment than GlobalData PLC. However, Optima Health plc is 1.16 times less risky than GlobalData PLC. It trades about 0.19 of its potential returns per unit of risk. GlobalData PLC is currently generating about -0.06 per unit of risk. If you would invest  15,250  in Optima Health plc on December 1, 2024 and sell it today you would earn a total of  3,000  from holding Optima Health plc or generate 19.67% return on investment over 90 days.

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

Optima Health plc  vs.  GlobalData PLC

Optima Health plc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Optima Health plc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Optima Health exhibited solid returns over the last few months and may actually be approaching a breakup point.

GlobalData PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days GlobalData PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Optima Health and GlobalData PLC

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

The idea behind Optima Health plc and GlobalData PLC 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.