Correlation Between Optima Bank and Titan Cement

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

Diversification Opportunities for Optima Bank and Titan Cement

0.39

Correlation Coefficient

Optima Bank  Titan Cement

Weak diversification

The 3 months correlation between Optima and Titan is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Optima bank SA and Titan Cement International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Titan Cement Interna 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 Titan Cement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Titan Cement Interna has no effect on the direction of Optima Bank i.e., Optima Bank and Titan Cement go up and down completely randomly.

Pair Corralation between Optima Bank and Titan Cement

Assuming the 90 days trading horizon Optima Bank is expected to generate 10.05 times less return on investment than Titan Cement. But when comparing it to its historical volatility, Optima bank SA is 1.53 times less risky than Titan Cement. It trades about 0.06 of its potential returns per unit of risk. Titan Cement International is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest  3,275  in Titan Cement International on October 26, 2024 and sell it today you would earn a total of  1,255  from holding Titan Cement International or generate 38.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.31%
Values	Daily Returns

Optima bank SA  vs.  Titan Cement International

Optima bank SA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Optima bank SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

Titan Cement Interna

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Titan Cement International are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Titan Cement unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Optima Bank and Titan Cement

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

The idea behind Optima bank SA and Titan Cement International 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..