Correlation Between Zegona Communications and Optima Health

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

By analyzing existing cross correlation between Zegona Communications Plc and Optima Health plc, you can compare the effects of market volatilities on Zegona Communications and Optima Health 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 Zegona Communications with a short position of Optima Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zegona Communications and Optima Health.

Diversification Opportunities for Zegona Communications and Optima Health

-0.64

Correlation Coefficient

Zegona Communications  Optima Health

Excellent diversification

The 3 months correlation between Zegona and Optima is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Zegona Communications Plc and Optima Health plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Optima Health plc and Zegona Communications 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 Zegona Communications Plc are associated (or correlated) with Optima Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Optima Health plc has no effect on the direction of Zegona Communications i.e., Zegona Communications and Optima Health go up and down completely randomly.

Pair Corralation between Zegona Communications and Optima Health

Assuming the 90 days trading horizon Zegona Communications Plc is expected to generate 4.27 times more return on investment than Optima Health. However, Zegona Communications is 4.27 times more volatile than Optima Health plc. It trades about 0.12 of its potential returns per unit of risk. Optima Health plc is currently generating about -0.27 per unit of risk. If you would invest  33,000  in Zegona Communications Plc on August 31, 2024 and sell it today you would earn a total of  2,200  from holding Zegona Communications Plc or generate 6.67% return on investment over 90 days.

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

Zegona Communications Plc  vs.  Optima Health plc

Zegona Communications Plc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Zegona Communications Plc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Zegona Communications is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Optima Health plc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Optima Health plc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Optima Health is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Zegona Communications and Optima Health

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

The idea behind Zegona Communications Plc and Optima Health plc 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.