Correlation Between Bank of Greece and Optima Bank

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

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

Diversification Opportunities for Bank of Greece and Optima Bank

0.31

Correlation Coefficient

Bank of Greece  Optima Bank

Weak diversification

The 3 months correlation between Bank and Optima is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Greece 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 Bank of Greece 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 Bank of Greece 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 Bank of Greece i.e., Bank of Greece and Optima Bank go up and down completely randomly.

Pair Corralation between Bank of Greece and Optima Bank

Assuming the 90 days trading horizon Bank of Greece is expected to generate 111.63 times less return on investment than Optima Bank. But when comparing it to its historical volatility, Bank of Greece is 1.48 times less risky than Optima Bank. It trades about 0.0 of its potential returns per unit of risk. Optima bank SA is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  1,272  in Optima bank SA on December 30, 2024 and sell it today you would earn a total of  308.00  from holding Optima bank SA or generate 24.21% return on investment over 90 days.

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

Bank of Greece  vs.  Optima bank SA

Bank of Greece

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bank of Greece has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Bank of Greece 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

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Optima bank SA are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Optima Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank of Greece and Optima Bank

The main advantage of trading using opposite Bank of Greece and Optima Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Greece 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 Bank of Greece 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.

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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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.