Correlation Between Deluxe and ODDITY Tech

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

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

Diversification Opportunities for Deluxe and ODDITY Tech

0.77

Correlation Coefficient

Deluxe  ODDITY Tech

Poor diversification

The 3 months correlation between Deluxe and ODDITY is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Deluxe and ODDITY Tech Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ODDITY Tech and Deluxe 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 Deluxe 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 Deluxe i.e., Deluxe and ODDITY Tech go up and down completely randomly.

Pair Corralation between Deluxe and ODDITY Tech

Considering the 90-day investment horizon Deluxe is expected to generate 23.64 times less return on investment than ODDITY Tech. But when comparing it to its historical volatility, Deluxe is 22.72 times less risky than ODDITY Tech. It trades about 0.05 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 18, 2024 and sell it today you would earn a total of  4,976  from holding ODDITY Tech Ltd or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	72.32%
Values	Daily Returns

Deluxe  vs.  ODDITY Tech Ltd

Deluxe

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Deluxe are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating essential indicators, Deluxe showed solid returns over the last few months and may actually be approaching a breakup point.

ODDITY Tech

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ODDITY Tech Ltd are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, ODDITY Tech exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Deluxe and ODDITY Tech

The main advantage of trading using opposite Deluxe and ODDITY Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deluxe 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 Deluxe 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.

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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.