Correlation Between Otto Energy and Regis Healthcare

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

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

Diversification Opportunities for Otto Energy and Regis Healthcare

0.43

Correlation Coefficient

Otto Energy  Regis Healthcare

Very weak diversification

The 3 months correlation between Otto and Regis is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Otto Energy and Regis Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regis Healthcare and Otto Energy 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 Otto Energy are associated (or correlated) with Regis Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regis Healthcare has no effect on the direction of Otto Energy i.e., Otto Energy and Regis Healthcare go up and down completely randomly.

Pair Corralation between Otto Energy and Regis Healthcare

Assuming the 90 days trading horizon Otto Energy is expected to generate 2.42 times more return on investment than Regis Healthcare. However, Otto Energy is 2.42 times more volatile than Regis Healthcare. It trades about -0.06 of its potential returns per unit of risk. Regis Healthcare is currently generating about -0.26 per unit of risk. If you would invest  1.10  in Otto Energy on October 6, 2024 and sell it today you would lose (0.10) from holding Otto Energy or give up 9.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

Otto Energy  vs.  Regis Healthcare

Otto Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Otto Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's essential indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Regis Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Regis Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Regis Healthcare is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Otto Energy and Regis Healthcare

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

The idea behind Otto Energy and Regis Healthcare 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.