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

0.64

Correlation Coefficient

Bank of Greece  Optima Bank

Poor diversification

The 3 months correlation between Bank and Optima is 0.64. 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 under-perform the Optima Bank. But the stock apears to be less risky and, when comparing its historical volatility, Bank of Greece is 1.11 times less risky than Optima Bank. The stock trades about -0.08 of its potential returns per unit of risk. The Optima bank SA is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  1,322  in Optima bank SA on September 5, 2024 and sell it today you would lose (58.00) from holding Optima bank SA or give up 4.39% of portfolio value over 90 days.

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

Bank of Greece  vs.  Optima bank SA

Bank of Greece

Risk-Adjusted Performance

0 of 100

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

0 of 100

Very Weak

Over the last 90 days Optima bank SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Optima Bank is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..