Correlation Between Optima Bank and Cenergy Holdings

Can any of the company-specific risk be diversified away by investing in both Optima Bank and Cenergy Holdings 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 Bank and Cenergy Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Optima bank SA and Cenergy Holdings SA, you can compare the effects of market volatilities on Optima Bank and Cenergy Holdings 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 Bank with a short position of Cenergy Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Optima Bank and Cenergy Holdings.

Diversification Opportunities for Optima Bank and Cenergy Holdings

0.68

Correlation Coefficient

Optima Bank  Cenergy Holdings

Poor diversification

The 3 months correlation between Optima and Cenergy is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Optima bank SA and Cenergy Holdings SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cenergy Holdings and Optima Bank 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 bank SA are associated (or correlated) with Cenergy Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cenergy Holdings has no effect on the direction of Optima Bank i.e., Optima Bank and Cenergy Holdings go up and down completely randomly.

Pair Corralation between Optima Bank and Cenergy Holdings

Assuming the 90 days trading horizon Optima bank SA is expected to generate 0.52 times more return on investment than Cenergy Holdings. However, Optima bank SA is 1.93 times less risky than Cenergy Holdings. It trades about -0.04 of its potential returns per unit of risk. Cenergy Holdings SA is currently generating about -0.03 per unit of risk. If you would invest  1,300  in Optima bank SA on September 14, 2024 and sell it today you would lose (34.00) from holding Optima bank SA or give up 2.62% of portfolio value over 90 days.

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

Optima bank SA  vs.  Cenergy Holdings SA

Optima bank SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Optima bank SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Optima Bank is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Cenergy Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cenergy Holdings SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Cenergy Holdings is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Optima Bank and Cenergy Holdings

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

The idea behind Optima bank SA and Cenergy Holdings SA 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.

Check out your portfolio center.

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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.