Correlation Between OBSERVE MEDICAL and Darden Restaurants

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

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

Diversification Opportunities for OBSERVE MEDICAL and Darden Restaurants

-0.45

Correlation Coefficient

OBSERVE MEDICAL  Darden Restaurants

Very good diversification

The 3 months correlation between OBSERVE and Darden is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding OBSERVE MEDICAL ASA and Darden Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Darden Restaurants and OBSERVE MEDICAL 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 OBSERVE MEDICAL ASA are associated (or correlated) with Darden Restaurants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Darden Restaurants has no effect on the direction of OBSERVE MEDICAL i.e., OBSERVE MEDICAL and Darden Restaurants go up and down completely randomly.

Pair Corralation between OBSERVE MEDICAL and Darden Restaurants

Assuming the 90 days trading horizon OBSERVE MEDICAL ASA is expected to generate 8.75 times more return on investment than Darden Restaurants. However, OBSERVE MEDICAL is 8.75 times more volatile than Darden Restaurants. It trades about 0.01 of its potential returns per unit of risk. Darden Restaurants is currently generating about -0.04 per unit of risk. If you would invest  44.00  in OBSERVE MEDICAL ASA on December 21, 2024 and sell it today you would lose (14.00) from holding OBSERVE MEDICAL ASA or give up 31.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	93.33%
Values	Daily Returns

OBSERVE MEDICAL ASA  vs.  Darden Restaurants

OBSERVE MEDICAL ASA

Risk-Adjusted Performance

Very Weak

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

Darden Restaurants

Risk-Adjusted Performance

Very Weak

Over the last 90 days Darden Restaurants has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Darden Restaurants 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 OBSERVE MEDICAL and Darden Restaurants

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

The idea behind OBSERVE MEDICAL ASA and Darden Restaurants 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 Global Correlations module to find global opportunities by holding instruments from different markets.