Correlation Between Bicicletas Monark and Otis Worldwide

Can any of the company-specific risk be diversified away by investing in both Bicicletas Monark and Otis Worldwide 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 Bicicletas Monark and Otis Worldwide into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bicicletas Monark SA and Otis Worldwide, you can compare the effects of market volatilities on Bicicletas Monark and Otis Worldwide 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 Bicicletas Monark with a short position of Otis Worldwide. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bicicletas Monark and Otis Worldwide.

Diversification Opportunities for Bicicletas Monark and Otis Worldwide

0.3

Correlation Coefficient

Bicicletas Monark  Otis Worldwide

Weak diversification

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

Pair Corralation between Bicicletas Monark and Otis Worldwide

Assuming the 90 days trading horizon Bicicletas Monark SA is expected to generate 2.19 times more return on investment than Otis Worldwide. However, Bicicletas Monark is 2.19 times more volatile than Otis Worldwide. It trades about 0.13 of its potential returns per unit of risk. Otis Worldwide is currently generating about 0.04 per unit of risk. If you would invest  32,300  in Bicicletas Monark SA on December 30, 2024 and sell it today you would earn a total of  5,800  from holding Bicicletas Monark SA or generate 17.96% return on investment over 90 days.

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

Bicicletas Monark SA  vs.  Otis Worldwide

Bicicletas Monark

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bicicletas Monark SA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Bicicletas Monark unveiled solid returns over the last few months and may actually be approaching a breakup point.

Otis Worldwide

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Otis Worldwide are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Otis Worldwide is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bicicletas Monark and Otis Worldwide

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

The idea behind Bicicletas Monark SA and Otis Worldwide 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.

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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.