Correlation Between Ocean Biomedical and GMO Internet

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

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

Diversification Opportunities for Ocean Biomedical and GMO Internet

0.0

Correlation Coefficient

Ocean Biomedical  GMO Internet

Pay attention - limited upside

The 3 months correlation between Ocean and GMO is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Ocean Biomedical and GMO Internet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMO Internet and Ocean Biomedical 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 Ocean Biomedical are associated (or correlated) with GMO Internet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GMO Internet has no effect on the direction of Ocean Biomedical i.e., Ocean Biomedical and GMO Internet go up and down completely randomly.

Pair Corralation between Ocean Biomedical and GMO Internet

Assuming the 90 days horizon Ocean Biomedical is expected to generate 1.53 times more return on investment than GMO Internet. However, Ocean Biomedical is 1.53 times more volatile than GMO Internet. It trades about 0.08 of its potential returns per unit of risk. GMO Internet is currently generating about 0.07 per unit of risk. If you would invest  15.00  in Ocean Biomedical on October 26, 2024 and sell it today you would lose (12.17) from holding Ocean Biomedical or give up 81.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	96.56%
Values	Daily Returns

Ocean Biomedical  vs.  GMO Internet

Ocean Biomedical

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ocean Biomedical are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Ocean Biomedical showed solid returns over the last few months and may actually be approaching a breakup point.

GMO Internet

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Ocean Biomedical and GMO Internet

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

The idea behind Ocean Biomedical and GMO Internet 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.

Check out your portfolio center.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.