Correlation Between Optima Health and Learning Technologies

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

Diversification Opportunities for Optima Health and Learning Technologies

-0.7

Correlation Coefficient

Optima Health  Learning Technologies

Excellent diversification

The 3 months correlation between Optima and Learning is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Optima Health plc and Learning Technologies Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Learning Technologies 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 Learning Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Learning Technologies has no effect on the direction of Optima Health i.e., Optima Health and Learning Technologies go up and down completely randomly.

Pair Corralation between Optima Health and Learning Technologies

Assuming the 90 days trading horizon Optima Health plc is expected to under-perform the Learning Technologies. In addition to that, Optima Health is 4.23 times more volatile than Learning Technologies Group. It trades about -0.64 of its total potential returns per unit of risk. Learning Technologies Group is currently generating about -0.21 per unit of volatility. If you would invest  9,840  in Learning Technologies Group on October 12, 2024 and sell it today you would lose (80.00) from holding Learning Technologies Group or give up 0.81% of portfolio value over 90 days.

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

Optima Health plc  vs.  Learning Technologies 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 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.

Learning Technologies

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Learning Technologies Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Learning Technologies is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Optima Health and Learning Technologies

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

The idea behind Optima Health plc and Learning Technologies 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 Transaction History module to view history of all your transactions and understand their impact on performance.