Correlation Between Optima Health and Zegona Communications

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

Diversification Opportunities for Optima Health and Zegona Communications

0.88

Correlation Coefficient

Optima Health  Zegona Communications

Very poor diversification

The 3 months correlation between Optima and Zegona is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Optima Health plc and Zegona Communications Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zegona Communications 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 Zegona Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zegona Communications Plc has no effect on the direction of Optima Health i.e., Optima Health and Zegona Communications go up and down completely randomly.

Pair Corralation between Optima Health and Zegona Communications

Assuming the 90 days trading horizon Optima Health is expected to generate 2.85 times less return on investment than Zegona Communications. But when comparing it to its historical volatility, Optima Health plc is 1.54 times less risky than Zegona Communications. It trades about 0.16 of its potential returns per unit of risk. Zegona Communications Plc is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  41,800  in Zegona Communications Plc on December 31, 2024 and sell it today you would earn a total of  26,700  from holding Zegona Communications Plc or generate 63.88% return on investment over 90 days.

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

Optima Health plc  vs.  Zegona Communications 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 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Optima Health exhibited solid returns over the last few months and may actually be approaching a breakup point.

Zegona Communications Plc

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Zegona Communications Plc are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Zegona Communications exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Optima Health and Zegona Communications

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

The idea behind Optima Health plc and Zegona Communications 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 Global Correlations module to find global opportunities by holding instruments from different markets.