Correlation Between Optima Bank and Bank of Greece

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

Diversification Opportunities for Optima Bank and Bank of Greece

0.31

Correlation Coefficient

Optima Bank  Bank of Greece

Weak diversification

The 3 months correlation between Optima and Bank is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Optima bank SA and Bank of Greece in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Greece 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 Bank of Greece. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Greece has no effect on the direction of Optima Bank i.e., Optima Bank and Bank of Greece go up and down completely randomly.

Pair Corralation between Optima Bank and Bank of Greece

Assuming the 90 days trading horizon Optima bank SA is expected to generate 1.48 times more return on investment than Bank of Greece. However, Optima Bank is 1.48 times more volatile than Bank of Greece. It trades about 0.3 of its potential returns per unit of risk. Bank of Greece is currently generating about 0.0 per unit of risk. If you would invest  1,272  in Optima bank SA on December 30, 2024 and sell it today you would earn a total of  308.00  from holding Optima bank SA or generate 24.21% return on investment over 90 days.

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

Optima bank SA  vs.  Bank of Greece

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 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Optima Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Bank of Greece

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bank of Greece has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Bank of Greece is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Optima Bank and Bank of Greece

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

The idea behind Optima bank SA and Bank of Greece 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.