Correlation Between Sparinvest INDEX and BankInvest Optima

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

By analyzing existing cross correlation between Sparinvest INDEX Globale and BankInvest Optima 30, you can compare the effects of market volatilities on Sparinvest INDEX and BankInvest Optima 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 Sparinvest INDEX with a short position of BankInvest Optima. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sparinvest INDEX and BankInvest Optima.

Diversification Opportunities for Sparinvest INDEX and BankInvest Optima

0.21

Correlation Coefficient

Sparinvest INDEX  BankInvest Optima

Modest diversification

The 3 months correlation between Sparinvest and BankInvest is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Sparinvest INDEX Globale and BankInvest Optima 30 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BankInvest Optima and Sparinvest INDEX 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 Sparinvest INDEX Globale are associated (or correlated) with BankInvest Optima. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BankInvest Optima has no effect on the direction of Sparinvest INDEX i.e., Sparinvest INDEX and BankInvest Optima go up and down completely randomly.

Pair Corralation between Sparinvest INDEX and BankInvest Optima

Assuming the 90 days trading horizon Sparinvest INDEX Globale is expected to generate 1.25 times more return on investment than BankInvest Optima. However, Sparinvest INDEX is 1.25 times more volatile than BankInvest Optima 30. It trades about 0.06 of its potential returns per unit of risk. BankInvest Optima 30 is currently generating about -0.16 per unit of risk. If you would invest  13,319  in Sparinvest INDEX Globale on December 29, 2024 and sell it today you would earn a total of  336.00  from holding Sparinvest INDEX Globale or generate 2.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	92.19%
Values	Daily Returns

Sparinvest INDEX Globale  vs.  BankInvest Optima 30

Sparinvest INDEX Globale

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sparinvest INDEX Globale are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy basic indicators, Sparinvest INDEX is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

BankInvest Optima

Risk-Adjusted Performance

Very Weak

Over the last 90 days BankInvest Optima 30 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, BankInvest Optima is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Sparinvest INDEX and BankInvest Optima

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

The idea behind Sparinvest INDEX Globale and BankInvest Optima 30 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.