Correlation Between Profile Systems and Optima Bank

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

By analyzing existing cross correlation between Profile Systems Software and Optima bank SA, you can compare the effects of market volatilities on Profile Systems and Optima Bank 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 Profile Systems with a short position of Optima Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Profile Systems and Optima Bank.

Diversification Opportunities for Profile Systems and Optima Bank

0.3

Correlation Coefficient

Profile Systems  Optima Bank

Weak diversification

The 3 months correlation between Profile and Optima is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Profile Systems Software and Optima bank SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Optima bank SA and Profile Systems 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 Profile Systems Software are associated (or correlated) with Optima Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Optima bank SA has no effect on the direction of Profile Systems i.e., Profile Systems and Optima Bank go up and down completely randomly.

Pair Corralation between Profile Systems and Optima Bank

Assuming the 90 days trading horizon Profile Systems Software is expected to generate 1.47 times more return on investment than Optima Bank. However, Profile Systems is 1.47 times more volatile than Optima bank SA. It trades about 0.04 of its potential returns per unit of risk. Optima bank SA is currently generating about -0.04 per unit of risk. If you would invest  508.00  in Profile Systems Software on September 12, 2024 and sell it today you would earn a total of  17.00  from holding Profile Systems Software or generate 3.35% return on investment over 90 days.

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

Profile Systems Software  vs.  Optima bank SA

Profile Systems Software

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Profile Systems Software are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Profile Systems is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Optima bank SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Optima bank SA has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with Profile Systems and Optima Bank

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

The idea behind Profile Systems Software and Optima bank SA 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.

Check out your portfolio center.

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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.