Correlation Between SV Investment and OCI

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

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

Diversification Opportunities for SV Investment and OCI

0.23

Correlation Coefficient

SV Investment  OCI

Modest diversification

The 3 months correlation between 289080 and OCI is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding SV Investment and OCI Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OCI Co and SV Investment 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 SV Investment are associated (or correlated) with OCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OCI Co has no effect on the direction of SV Investment i.e., SV Investment and OCI go up and down completely randomly.

Pair Corralation between SV Investment and OCI

Assuming the 90 days trading horizon SV Investment is expected to under-perform the OCI. But the stock apears to be less risky and, when comparing its historical volatility, SV Investment is 2.22 times less risky than OCI. The stock trades about 0.0 of its potential returns per unit of risk. The OCI Co is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  5,838,394  in OCI Co on December 23, 2024 and sell it today you would earn a total of  1,781,606  from holding OCI Co or generate 30.52% return on investment over 90 days.

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

SV Investment  vs.  OCI Co

SV Investment

Risk-Adjusted Performance

Very Weak

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

OCI Co

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in OCI Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, OCI sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SV Investment and OCI

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

The idea behind SV Investment and OCI 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.