Correlation Between Optima Bank and Interlife General

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

Diversification Opportunities for Optima Bank and Interlife General

0.52

Correlation Coefficient

Optima Bank  Interlife General

Very weak diversification

The 3 months correlation between Optima and Interlife is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Optima bank SA and Interlife General Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Interlife General 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 Interlife General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Interlife General has no effect on the direction of Optima Bank i.e., Optima Bank and Interlife General go up and down completely randomly.

Pair Corralation between Optima Bank and Interlife General

Assuming the 90 days trading horizon Optima bank SA is expected to generate 0.93 times more return on investment than Interlife General. However, Optima bank SA is 1.08 times less risky than Interlife General. It trades about 0.15 of its potential returns per unit of risk. Interlife General Insurance is currently generating about 0.05 per unit of risk. If you would invest  696.00  in Optima bank SA on December 3, 2024 and sell it today you would earn a total of  738.00  from holding Optima bank SA or generate 106.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	71.57%
Values	Daily Returns

Optima bank SA  vs.  Interlife General Insurance

Optima bank SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Optima bank SA are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Optima Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Interlife General

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Interlife General Insurance are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Interlife General sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Optima Bank and Interlife General

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

The idea behind Optima bank SA and Interlife General Insurance 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.