Correlation Between Analog Devices and ODDITY Tech

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

By analyzing existing cross correlation between Analog Devices and ODDITY Tech Ltd, you can compare the effects of market volatilities on Analog Devices and ODDITY 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 Analog Devices with a short position of ODDITY Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Analog Devices and ODDITY Tech.

Diversification Opportunities for Analog Devices and ODDITY Tech

-0.45

Correlation Coefficient

Analog Devices  ODDITY Tech

Very good diversification

The 3 months correlation between Analog and ODDITY is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices and ODDITY Tech Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ODDITY Tech and Analog Devices 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 Analog Devices are associated (or correlated) with ODDITY Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ODDITY Tech has no effect on the direction of Analog Devices i.e., Analog Devices and ODDITY Tech go up and down completely randomly.

Pair Corralation between Analog Devices and ODDITY Tech

Considering the 90-day investment horizon Analog Devices is expected to generate 35.0 times less return on investment than ODDITY Tech. But when comparing it to its historical volatility, Analog Devices is 28.96 times less risky than ODDITY Tech. It trades about 0.04 of its potential returns per unit of risk. ODDITY Tech Ltd is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  0.00  in ODDITY Tech Ltd on September 16, 2024 and sell it today you would earn a total of  4,945  from holding ODDITY Tech Ltd or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	72.18%
Values	Daily Returns

Analog Devices  vs.  ODDITY Tech Ltd

Analog Devices

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Analog Devices has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Analog Devices is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

ODDITY Tech

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ODDITY Tech Ltd are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, ODDITY Tech exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Analog Devices and ODDITY Tech

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

The idea behind Analog Devices and ODDITY Tech Ltd 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.