Correlation Between Ford and OBSERVE MEDICAL

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

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

Diversification Opportunities for Ford and OBSERVE MEDICAL

-0.37

Correlation Coefficient

Ford  OBSERVE MEDICAL

Very good diversification

The 3 months correlation between Ford and OBSERVE is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor 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 Ford 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 Ford Motor 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 Ford i.e., Ford and OBSERVE MEDICAL go up and down completely randomly.

Pair Corralation between Ford and OBSERVE MEDICAL

Taking into account the 90-day investment horizon Ford is expected to generate 118.88 times less return on investment than OBSERVE MEDICAL. But when comparing it to its historical volatility, Ford Motor is 15.42 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  21.00  in OBSERVE MEDICAL ASA on September 26, 2024 and sell it today you would lose (18.04) from holding OBSERVE MEDICAL ASA or give up 85.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.22%
Values	Daily Returns

Ford Motor  vs.  OBSERVE MEDICAL ASA

Ford Motor

Risk-Adjusted Performance

0 of 100

Very Weak

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

OBSERVE MEDICAL ASA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in OBSERVE MEDICAL ASA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, OBSERVE MEDICAL may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ford and OBSERVE MEDICAL

The main advantage of trading using opposite Ford and OBSERVE MEDICAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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 Ford Motor 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.