Correlation Between Ray and Osteonic

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

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

Diversification Opportunities for Ray and Osteonic

0.63

Correlation Coefficient

Ray  Osteonic

Poor diversification

The 3 months correlation between Ray and Osteonic is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Ray Co and Osteonic Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Osteonic and Ray 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 Ray Co are associated (or correlated) with Osteonic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Osteonic has no effect on the direction of Ray i.e., Ray and Osteonic go up and down completely randomly.

Pair Corralation between Ray and Osteonic

Assuming the 90 days trading horizon Ray Co is expected to under-perform the Osteonic. But the stock apears to be less risky and, when comparing its historical volatility, Ray Co is 1.16 times less risky than Osteonic. The stock trades about -0.22 of its potential returns per unit of risk. The Osteonic Co is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  526,000  in Osteonic Co on September 3, 2024 and sell it today you would lose (38,000) from holding Osteonic Co or give up 7.22% of portfolio value over 90 days.

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

Ray Co  vs.  Osteonic Co

Ray Co

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ray Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Osteonic

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Ray and Osteonic

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

The idea behind Ray Co and Osteonic Co 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.