Correlation Between Act Financial and ODIN Investments

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

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

Diversification Opportunities for Act Financial and ODIN Investments

-0.31

Correlation Coefficient

Act Financial  ODIN Investments

Very good diversification

The 3 months correlation between Act and ODIN is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Act Financial and ODIN Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ODIN Investments and Act Financial 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 Act Financial are associated (or correlated) with ODIN Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ODIN Investments has no effect on the direction of Act Financial i.e., Act Financial and ODIN Investments go up and down completely randomly.

Pair Corralation between Act Financial and ODIN Investments

Assuming the 90 days trading horizon Act Financial is expected to under-perform the ODIN Investments. But the stock apears to be less risky and, when comparing its historical volatility, Act Financial is 1.05 times less risky than ODIN Investments. The stock trades about -0.01 of its potential returns per unit of risk. The ODIN Investments is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  170.00  in ODIN Investments on December 4, 2024 and sell it today you would earn a total of  5.00  from holding ODIN Investments or generate 2.94% return on investment over 90 days.

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

Act Financial  vs.  ODIN Investments

Act Financial

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Act Financial are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Act Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

ODIN Investments

Risk-Adjusted Performance

Very Weak

Over the last 90 days ODIN Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Act Financial and ODIN Investments

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

The idea behind Act Financial and ODIN Investments 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.