Correlation Between OTP Bank and OPUS GLOBAL

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

Diversification Opportunities for OTP Bank and OPUS GLOBAL

0.74

Correlation Coefficient

OTP Bank  OPUS GLOBAL

Poor diversification

The 3 months correlation between OTP and OPUS is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding OTP Bank Nyrt and OPUS GLOBAL Nyrt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OPUS GLOBAL 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 OPUS GLOBAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OPUS GLOBAL Nyrt has no effect on the direction of OTP Bank i.e., OTP Bank and OPUS GLOBAL go up and down completely randomly.

Pair Corralation between OTP Bank and OPUS GLOBAL

Assuming the 90 days trading horizon OTP Bank is expected to generate 5.46 times less return on investment than OPUS GLOBAL. But when comparing it to its historical volatility, OTP Bank Nyrt is 1.19 times less risky than OPUS GLOBAL. It trades about 0.07 of its potential returns per unit of risk. OPUS GLOBAL Nyrt is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  53,200  in OPUS GLOBAL Nyrt on December 4, 2024 and sell it today you would earn a total of  6,900  from holding OPUS GLOBAL Nyrt or generate 12.97% return on investment over 90 days.

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

OTP Bank Nyrt  vs.  OPUS GLOBAL Nyrt

OTP Bank Nyrt

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in OTP Bank Nyrt are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, OTP Bank exhibited solid returns over the last few months and may actually be approaching a breakup point.

OPUS GLOBAL Nyrt

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in OPUS GLOBAL Nyrt are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, OPUS GLOBAL unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with OTP Bank and OPUS GLOBAL

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

The idea behind OTP Bank Nyrt and OPUS GLOBAL 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.