Correlation Between Compugroup Medical and OBSERVE MEDICAL

Can any of the company-specific risk be diversified away by investing in both Compugroup Medical and OBSERVE MEDICAL 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 Compugroup Medical and OBSERVE MEDICAL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Compugroup Medical SE and OBSERVE MEDICAL ASA, you can compare the effects of market volatilities on Compugroup Medical and OBSERVE MEDICAL 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 Compugroup Medical with a short position of OBSERVE MEDICAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compugroup Medical and OBSERVE MEDICAL.

Diversification Opportunities for Compugroup Medical and OBSERVE MEDICAL

0.42

Correlation Coefficient

Compugroup Medical  OBSERVE MEDICAL

Very weak diversification

The 3 months correlation between Compugroup and OBSERVE is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Compugroup Medical SE and OBSERVE MEDICAL ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OBSERVE MEDICAL ASA and Compugroup Medical 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 Compugroup Medical SE are associated (or correlated) with OBSERVE MEDICAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OBSERVE MEDICAL ASA has no effect on the direction of Compugroup Medical i.e., Compugroup Medical and OBSERVE MEDICAL go up and down completely randomly.

Pair Corralation between Compugroup Medical and OBSERVE MEDICAL

Assuming the 90 days horizon Compugroup Medical SE is expected to under-perform the OBSERVE MEDICAL. But the stock apears to be less risky and, when comparing its historical volatility, Compugroup Medical SE is 11.51 times less risky than OBSERVE MEDICAL. The stock trades about -0.02 of its potential returns per unit of risk. The OBSERVE MEDICAL ASA is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  19.00  in OBSERVE MEDICAL ASA on October 4, 2024 and sell it today you would lose (16.24) from holding OBSERVE MEDICAL ASA or give up 85.47% of portfolio value over 90 days.

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

Compugroup Medical SE  vs.  OBSERVE MEDICAL ASA

Compugroup Medical

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Compugroup Medical SE are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Compugroup Medical reported solid returns over the last few months and may actually be approaching a breakup point.

OBSERVE MEDICAL ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days OBSERVE MEDICAL ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, OBSERVE MEDICAL is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Compugroup Medical and OBSERVE MEDICAL

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

The idea behind Compugroup Medical SE and OBSERVE MEDICAL ASA 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.