Correlation Between Formetal and Osang Healthcare

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

By analyzing existing cross correlation between Formetal Co and Osang Healthcare Co,Ltd, you can compare the effects of market volatilities on Formetal and Osang Healthcare 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 Formetal with a short position of Osang Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formetal and Osang Healthcare.

Diversification Opportunities for Formetal and Osang Healthcare

0.55

Correlation Coefficient

Formetal  Osang Healthcare

Very weak diversification

The 3 months correlation between Formetal and Osang is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Formetal Co and Osang Healthcare Co,Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Osang Healthcare Co,Ltd and Formetal 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 Formetal Co are associated (or correlated) with Osang Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Osang Healthcare Co,Ltd has no effect on the direction of Formetal i.e., Formetal and Osang Healthcare go up and down completely randomly.

Pair Corralation between Formetal and Osang Healthcare

Assuming the 90 days trading horizon Formetal Co is expected to generate 0.78 times more return on investment than Osang Healthcare. However, Formetal Co is 1.28 times less risky than Osang Healthcare. It trades about 0.14 of its potential returns per unit of risk. Osang Healthcare Co,Ltd is currently generating about 0.07 per unit of risk. If you would invest  270,517  in Formetal Co on October 20, 2024 and sell it today you would earn a total of  99,983  from holding Formetal Co or generate 36.96% return on investment over 90 days.

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

Formetal Co  vs.  Osang Healthcare Co,Ltd

Formetal

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Formetal Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Formetal sustained solid returns over the last few months and may actually be approaching a breakup point.

Osang Healthcare Co,Ltd

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Osang Healthcare Co,Ltd are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Osang Healthcare sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Formetal and Osang Healthcare

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

The idea behind Formetal Co and Osang Healthcare Co,Ltd 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.

Check out your portfolio center.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.