Correlation Between Arrowhead Properties and Omnia Holdings

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

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

Diversification Opportunities for Arrowhead Properties and Omnia Holdings

0.75

Correlation Coefficient

Arrowhead Properties  Omnia Holdings

Poor diversification

The 3 months correlation between Arrowhead and Omnia is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Arrowhead Properties Ltd and Omnia Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Omnia Holdings and Arrowhead Properties 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 Arrowhead Properties Ltd are associated (or correlated) with Omnia Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Omnia Holdings has no effect on the direction of Arrowhead Properties i.e., Arrowhead Properties and Omnia Holdings go up and down completely randomly.

Pair Corralation between Arrowhead Properties and Omnia Holdings

Assuming the 90 days trading horizon Arrowhead Properties Ltd is expected to generate 0.72 times more return on investment than Omnia Holdings. However, Arrowhead Properties Ltd is 1.39 times less risky than Omnia Holdings. It trades about -0.09 of its potential returns per unit of risk. Omnia Holdings Limited is currently generating about -0.1 per unit of risk. If you would invest  49,359  in Arrowhead Properties Ltd on October 15, 2024 and sell it today you would lose (1,859) from holding Arrowhead Properties Ltd or give up 3.77% of portfolio value over 90 days.

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

Arrowhead Properties Ltd  vs.  Omnia Holdings Limited

Arrowhead Properties

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Arrowhead Properties Ltd are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Arrowhead Properties is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Omnia Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Omnia Holdings Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Omnia Holdings may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Arrowhead Properties and Omnia Holdings

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

The idea behind Arrowhead Properties Ltd and Omnia Holdings Limited 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.