Correlation Between Microbot Medical and OBSERVE MEDICAL

Can any of the company-specific risk be diversified away by investing in both Microbot 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 Microbot 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 Microbot Medical and OBSERVE MEDICAL ASA, you can compare the effects of market volatilities on Microbot 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 Microbot Medical with a short position of OBSERVE MEDICAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microbot Medical and OBSERVE MEDICAL.

Diversification Opportunities for Microbot Medical and OBSERVE MEDICAL

0.1

Correlation Coefficient

Microbot Medical  OBSERVE MEDICAL

Average diversification

The 3 months correlation between Microbot and OBSERVE is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Microbot Medical 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 Microbot 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 Microbot Medical 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 Microbot Medical i.e., Microbot Medical and OBSERVE MEDICAL go up and down completely randomly.

Pair Corralation between Microbot Medical and OBSERVE MEDICAL

Assuming the 90 days trading horizon Microbot Medical is expected to generate 17.84 times less return on investment than OBSERVE MEDICAL. But when comparing it to its historical volatility, Microbot Medical is 3.37 times less risky than OBSERVE MEDICAL. It trades about 0.01 of its potential returns per unit of risk. 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 5, 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	Insignificant
Accuracy	100.0%
Values	Daily Returns

Microbot Medical  vs.  OBSERVE MEDICAL ASA

Microbot Medical

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Microbot Medical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively uncertain basic indicators, Microbot Medical unveiled 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 Microbot Medical and OBSERVE MEDICAL

The main advantage of trading using opposite Microbot Medical and OBSERVE MEDICAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microbot 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 Microbot Medical 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.