Correlation Between OBI Pharma and King Slide

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

By analyzing existing cross correlation between OBI Pharma and King Slide Works, you can compare the effects of market volatilities on OBI Pharma and King Slide 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 King Slide. Check out your portfolio center. Please also check ongoing floating volatility patterns of OBI Pharma and King Slide.

Diversification Opportunities for OBI Pharma and King Slide

0.64

Correlation Coefficient

OBI Pharma  King Slide

Poor diversification

The 3 months correlation between OBI and King is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding OBI Pharma and King Slide Works in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on King Slide Works 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 King Slide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of King Slide Works has no effect on the direction of OBI Pharma i.e., OBI Pharma and King Slide go up and down completely randomly.

Pair Corralation between OBI Pharma and King Slide

Assuming the 90 days trading horizon OBI Pharma is expected to under-perform the King Slide. But the stock apears to be less risky and, when comparing its historical volatility, OBI Pharma is 1.79 times less risky than King Slide. The stock trades about -0.06 of its potential returns per unit of risk. The King Slide Works is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  159,500  in King Slide Works on December 5, 2024 and sell it today you would earn a total of  41,000  from holding King Slide Works or generate 25.71% return on investment over 90 days.

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

OBI Pharma  vs.  King Slide Works

OBI Pharma

Risk-Adjusted Performance

Very Weak

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

King Slide Works

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in King Slide Works are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, King Slide showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with OBI Pharma and King Slide

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

The idea behind OBI Pharma and King Slide Works 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.