Correlation Between OTP Bank and 4iG Nyrt

Can any of the company-specific risk be diversified away by investing in both OTP Bank and 4iG Nyrt 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 OTP Bank and 4iG Nyrt into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between OTP Bank Nyrt and 4iG Nyrt, you can compare the effects of market volatilities on OTP Bank and 4iG Nyrt 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 OTP Bank with a short position of 4iG Nyrt. Check out your portfolio center. Please also check ongoing floating volatility patterns of OTP Bank and 4iG Nyrt.

Diversification Opportunities for OTP Bank and 4iG Nyrt

0.46

Correlation Coefficient

OTP Bank  4iG Nyrt

Very weak diversification

The 3 months correlation between OTP and 4iG is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding OTP Bank Nyrt and 4iG Nyrt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 4iG Nyrt and OTP 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 OTP Bank Nyrt are associated (or correlated) with 4iG Nyrt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 4iG Nyrt has no effect on the direction of OTP Bank i.e., OTP Bank and 4iG Nyrt go up and down completely randomly.

Pair Corralation between OTP Bank and 4iG Nyrt

Assuming the 90 days trading horizon OTP Bank Nyrt is expected to generate 1.08 times more return on investment than 4iG Nyrt. However, OTP Bank is 1.08 times more volatile than 4iG Nyrt. It trades about 0.2 of its potential returns per unit of risk. 4iG Nyrt is currently generating about 0.07 per unit of risk. If you would invest  1,825,500  in OTP Bank Nyrt on September 3, 2024 and sell it today you would earn a total of  291,500  from holding OTP Bank Nyrt or generate 15.97% return on investment over 90 days.

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

OTP Bank Nyrt  vs.  4iG Nyrt

OTP Bank Nyrt

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in OTP Bank Nyrt are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, OTP Bank exhibited solid returns over the last few months and may actually be approaching a breakup point.

4iG Nyrt

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in 4iG Nyrt are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, 4iG Nyrt is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with OTP Bank and 4iG Nyrt

The main advantage of trading using opposite OTP Bank and 4iG Nyrt positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OTP Bank position performs unexpectedly, 4iG Nyrt 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 4iG Nyrt will offset losses from the drop in 4iG Nyrt's long position.

The idea behind OTP Bank Nyrt and 4iG Nyrt 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.