Correlation Between OBI Pharma and SYN Tech

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

By analyzing existing cross correlation between OBI Pharma and SYN Tech Chem Pharm, you can compare the effects of market volatilities on OBI Pharma and SYN Tech 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 OBI Pharma with a short position of SYN Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of OBI Pharma and SYN Tech.

Diversification Opportunities for OBI Pharma and SYN Tech

0.3

Correlation Coefficient

OBI Pharma  SYN Tech

Weak diversification

The 3 months correlation between OBI and SYN is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding OBI Pharma and SYN Tech Chem Pharm in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SYN Tech Chem and OBI Pharma 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 OBI Pharma are associated (or correlated) with SYN Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SYN Tech Chem has no effect on the direction of OBI Pharma i.e., OBI Pharma and SYN Tech go up and down completely randomly.

Pair Corralation between OBI Pharma and SYN Tech

Assuming the 90 days trading horizon OBI Pharma is expected to generate 1.46 times less return on investment than SYN Tech. In addition to that, OBI Pharma is 1.42 times more volatile than SYN Tech Chem Pharm. It trades about 0.09 of its total potential returns per unit of risk. SYN Tech Chem Pharm is currently generating about 0.19 per unit of volatility. If you would invest  9,310  in SYN Tech Chem Pharm on December 20, 2024 and sell it today you would earn a total of  1,240  from holding SYN Tech Chem Pharm or generate 13.32% return on investment over 90 days.

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

OBI Pharma  vs.  SYN Tech Chem Pharm

OBI Pharma

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in OBI Pharma are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, OBI Pharma may actually be approaching a critical reversion point that can send shares even higher in April 2025.

SYN Tech Chem

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SYN Tech Chem Pharm are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, SYN Tech showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with OBI Pharma and SYN Tech

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

The idea behind OBI Pharma and SYN Tech Chem Pharm 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.