Correlation Between Sona Topas and Optima Prima

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

By analyzing existing cross correlation between Sona Topas Tourism and Optima Prima Metal, you can compare the effects of market volatilities on Sona Topas and Optima Prima 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 Sona Topas with a short position of Optima Prima. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sona Topas and Optima Prima.

Diversification Opportunities for Sona Topas and Optima Prima

-0.1

Correlation Coefficient

Sona Topas  Optima Prima

Good diversification

The 3 months correlation between Sona and Optima is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Sona Topas Tourism and Optima Prima Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Optima Prima Metal and Sona Topas 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 Sona Topas Tourism are associated (or correlated) with Optima Prima. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Optima Prima Metal has no effect on the direction of Sona Topas i.e., Sona Topas and Optima Prima go up and down completely randomly.

Pair Corralation between Sona Topas and Optima Prima

Assuming the 90 days trading horizon Sona Topas Tourism is expected to generate 12.06 times more return on investment than Optima Prima. However, Sona Topas is 12.06 times more volatile than Optima Prima Metal. It trades about 0.03 of its potential returns per unit of risk. Optima Prima Metal is currently generating about 0.0 per unit of risk. If you would invest  419,000  in Sona Topas Tourism on December 29, 2024 and sell it today you would lose (48,000) from holding Sona Topas Tourism or give up 11.46% of portfolio value over 90 days.

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

Sona Topas Tourism  vs.  Optima Prima Metal

Sona Topas Tourism

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sona Topas Tourism are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Sona Topas disclosed solid returns over the last few months and may actually be approaching a breakup point.

Optima Prima Metal

Risk-Adjusted Performance

Very Weak

Over the last 90 days Optima Prima Metal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Optima Prima is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Sona Topas and Optima Prima

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

The idea behind Sona Topas Tourism and Optima Prima Metal 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.