Correlation Between Optronics Technologies and Karelia Tobacco

Can any of the company-specific risk be diversified away by investing in both Optronics Technologies and Karelia Tobacco 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 Optronics Technologies and Karelia Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Optronics Technologies SA and Karelia Tobacco, you can compare the effects of market volatilities on Optronics Technologies and Karelia Tobacco 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 Optronics Technologies with a short position of Karelia Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Optronics Technologies and Karelia Tobacco.

Diversification Opportunities for Optronics Technologies and Karelia Tobacco

0.47

Correlation Coefficient

Optronics Technologies  Karelia Tobacco

Very weak diversification

The 3 months correlation between Optronics and Karelia is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Optronics Technologies SA and Karelia Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Karelia Tobacco and Optronics Technologies 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 Optronics Technologies SA are associated (or correlated) with Karelia Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Karelia Tobacco has no effect on the direction of Optronics Technologies i.e., Optronics Technologies and Karelia Tobacco go up and down completely randomly.

Pair Corralation between Optronics Technologies and Karelia Tobacco

Assuming the 90 days trading horizon Optronics Technologies SA is expected to under-perform the Karelia Tobacco. But the stock apears to be less risky and, when comparing its historical volatility, Optronics Technologies SA is 1.58 times less risky than Karelia Tobacco. The stock trades about -0.13 of its potential returns per unit of risk. The Karelia Tobacco is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  33,600  in Karelia Tobacco on December 2, 2024 and sell it today you would lose (1,200) from holding Karelia Tobacco or give up 3.57% of portfolio value over 90 days.

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

Optronics Technologies SA  vs.  Karelia Tobacco

Optronics Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Optronics Technologies SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Karelia Tobacco

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Optronics Technologies and Karelia Tobacco

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

The idea behind Optronics Technologies SA and Karelia Tobacco 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.