Correlation Between Opko Health and Libra Insurance

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

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

Diversification Opportunities for Opko Health and Libra Insurance

-0.21

Correlation Coefficient

Opko Health  Libra Insurance

Very good diversification

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

Pair Corralation between Opko Health and Libra Insurance

Assuming the 90 days trading horizon Opko Health is expected to generate 10.42 times less return on investment than Libra Insurance. In addition to that, Opko Health is 1.33 times more volatile than Libra Insurance. It trades about 0.03 of its total potential returns per unit of risk. Libra Insurance is currently generating about 0.45 per unit of volatility. If you would invest  54,894  in Libra Insurance on September 21, 2024 and sell it today you would earn a total of  42,026  from holding Libra Insurance or generate 76.56% return on investment over 90 days.

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

Opko Health  vs.  Libra Insurance

Opko Health

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Opko Health are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward-looking signals, Opko Health may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Libra Insurance

Risk-Adjusted Performance

35 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Libra Insurance are ranked lower than 35 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Libra Insurance sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Opko Health and Libra Insurance

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

The idea behind Opko Health and Libra Insurance 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.