Correlation Between OTP Bank and Gap

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

Diversification Opportunities for OTP Bank and Gap

0.81

Correlation Coefficient

OTP Bank  Gap

Very poor diversification

The 3 months correlation between OTP and Gap is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding OTP Bank Nyrt and The Gap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gap 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 Gap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gap has no effect on the direction of OTP Bank i.e., OTP Bank and Gap go up and down completely randomly.

Pair Corralation between OTP Bank and Gap

Assuming the 90 days horizon OTP Bank Nyrt is expected to generate 0.7 times more return on investment than Gap. However, OTP Bank Nyrt is 1.44 times less risky than Gap. It trades about -0.04 of its potential returns per unit of risk. The Gap is currently generating about -0.21 per unit of risk. If you would invest  5,204  in OTP Bank Nyrt on October 9, 2024 and sell it today you would lose (70.00) from holding OTP Bank Nyrt or give up 1.35% of portfolio value over 90 days.

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

OTP Bank Nyrt  vs.  The Gap

OTP Bank Nyrt

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in OTP Bank Nyrt are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, OTP Bank may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Gap

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Gap are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Gap reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with OTP Bank and Gap

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

The idea behind OTP Bank Nyrt and The Gap 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.