Correlation Between Arrow Financial and Osaka Steel

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

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

Diversification Opportunities for Arrow Financial and Osaka Steel

0.29

Correlation Coefficient

Arrow Financial  Osaka Steel

Modest diversification

The 3 months correlation between Arrow and Osaka is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Financial and Osaka Steel Co, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Osaka Steel Co, and Arrow 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 Arrow Financial are associated (or correlated) with Osaka Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Osaka Steel Co, has no effect on the direction of Arrow Financial i.e., Arrow Financial and Osaka Steel go up and down completely randomly.

Pair Corralation between Arrow Financial and Osaka Steel

Given the investment horizon of 90 days Arrow Financial is expected to generate 33.99 times more return on investment than Osaka Steel. However, Arrow Financial is 33.99 times more volatile than Osaka Steel Co,. It trades about 0.03 of its potential returns per unit of risk. Osaka Steel Co, is currently generating about 0.06 per unit of risk. If you would invest  2,679  in Arrow Financial on September 24, 2024 and sell it today you would earn a total of  221.00  from holding Arrow Financial or generate 8.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.6%
Values	Daily Returns

Arrow Financial  vs.  Osaka Steel Co,

Arrow Financial

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Arrow Financial are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Arrow Financial is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Osaka Steel Co,

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Osaka Steel Co, are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Osaka Steel is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Arrow Financial and Osaka Steel

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

The idea behind Arrow Financial and Osaka Steel Co, 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.