Correlation Between Optima Bank and Terna Energy

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

Diversification Opportunities for Optima Bank and Terna Energy

0.45

Correlation Coefficient

Optima Bank  Terna Energy

Very weak diversification

The 3 months correlation between Optima and Terna is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Optima bank SA and Terna Energy Societe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terna Energy Societe 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 Terna Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Terna Energy Societe has no effect on the direction of Optima Bank i.e., Optima Bank and Terna Energy go up and down completely randomly.

Pair Corralation between Optima Bank and Terna Energy

Assuming the 90 days trading horizon Optima bank SA is expected to generate 1.86 times more return on investment than Terna Energy. However, Optima Bank is 1.86 times more volatile than Terna Energy Societe. It trades about 0.18 of its potential returns per unit of risk. Terna Energy Societe is currently generating about 0.09 per unit of risk. If you would invest  751.00  in Optima bank SA on December 4, 2024 and sell it today you would earn a total of  683.00  from holding Optima bank SA or generate 90.95% return on investment over 90 days.

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

Optima bank SA  vs.  Terna Energy Societe

Optima bank SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Optima bank SA are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Optima Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Terna Energy Societe

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Terna Energy Societe are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Terna Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Optima Bank and Terna Energy

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

The idea behind Optima bank SA and Terna Energy Societe 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.