Correlation Between Dassault Systèmes and OtelloASA

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

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

Diversification Opportunities for Dassault Systèmes and OtelloASA

0.11

Correlation Coefficient

Dassault Systèmes  OtelloASA

Average diversification

The 3 months correlation between Dassault and OtelloASA is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Dassault Systmes SE and Otello ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Otello ASA and Dassault Systèmes 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 Dassault Systmes SE are associated (or correlated) with OtelloASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Otello ASA has no effect on the direction of Dassault Systèmes i.e., Dassault Systèmes and OtelloASA go up and down completely randomly.

Pair Corralation between Dassault Systèmes and OtelloASA

Assuming the 90 days horizon Dassault Systmes SE is expected to generate 1.07 times more return on investment than OtelloASA. However, Dassault Systèmes is 1.07 times more volatile than Otello ASA. It trades about -0.04 of its potential returns per unit of risk. Otello ASA is currently generating about -0.06 per unit of risk. If you would invest  3,420  in Dassault Systmes SE on October 8, 2024 and sell it today you would lose (160.00) from holding Dassault Systmes SE or give up 4.68% of portfolio value over 90 days.

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

Dassault Systmes SE  vs.  Otello ASA

Dassault Systèmes

Risk-Adjusted Performance

0 of 100

Very Weak

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

Otello ASA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Dassault Systèmes and OtelloASA

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

The idea behind Dassault Systmes SE and Otello 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.