Correlation Between Otsuka Information and Xander International

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

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

Diversification Opportunities for Otsuka Information and Xander International

0.07

Correlation Coefficient

Otsuka Information  Xander International

Significant diversification

The 3 months correlation between Otsuka and Xander is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Otsuka Information Technology and Xander International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xander International and Otsuka Information 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 Otsuka Information Technology are associated (or correlated) with Xander International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xander International has no effect on the direction of Otsuka Information i.e., Otsuka Information and Xander International go up and down completely randomly.

Pair Corralation between Otsuka Information and Xander International

Assuming the 90 days trading horizon Otsuka Information Technology is expected to under-perform the Xander International. But the stock apears to be less risky and, when comparing its historical volatility, Otsuka Information Technology is 1.41 times less risky than Xander International. The stock trades about -0.05 of its potential returns per unit of risk. The Xander International is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,350  in Xander International on October 25, 2024 and sell it today you would lose (30.00) from holding Xander International or give up 1.28% of portfolio value over 90 days.

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

Otsuka Information Technology  vs.  Xander International

Otsuka Information

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Otsuka Information Technology are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Otsuka Information showed solid returns over the last few months and may actually be approaching a breakup point.

Xander International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xander International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Xander International is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Otsuka Information and Xander International

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

The idea behind Otsuka Information Technology and Xander International 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.