Correlation Between OBSERVE MEDICAL and Fuji Media

Can any of the company-specific risk be diversified away by investing in both OBSERVE MEDICAL and Fuji Media 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 Fuji Media 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 Fuji Media Holdings, you can compare the effects of market volatilities on OBSERVE MEDICAL and Fuji Media 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 Fuji Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of OBSERVE MEDICAL and Fuji Media.

Diversification Opportunities for OBSERVE MEDICAL and Fuji Media

0.72

Correlation Coefficient

OBSERVE MEDICAL  Fuji Media

Poor diversification

The 3 months correlation between OBSERVE and Fuji is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding OBSERVE MEDICAL ASA and Fuji Media Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fuji Media Holdings 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 Fuji Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fuji Media Holdings has no effect on the direction of OBSERVE MEDICAL i.e., OBSERVE MEDICAL and Fuji Media go up and down completely randomly.

Pair Corralation between OBSERVE MEDICAL and Fuji Media

Assuming the 90 days trading horizon OBSERVE MEDICAL ASA is expected to generate 18.66 times more return on investment than Fuji Media. However, OBSERVE MEDICAL is 18.66 times more volatile than Fuji Media Holdings. It trades about 0.07 of its potential returns per unit of risk. Fuji Media Holdings is currently generating about 0.04 per unit of risk. If you would invest  18.00  in OBSERVE MEDICAL ASA on October 10, 2024 and sell it today you would lose (15.18) from holding OBSERVE MEDICAL ASA or give up 84.33% of portfolio value over 90 days.

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

OBSERVE MEDICAL ASA  vs.  Fuji Media Holdings

OBSERVE MEDICAL ASA

Risk-Adjusted Performance

0 of 100

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.

Fuji Media Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fuji Media Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Fuji Media is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with OBSERVE MEDICAL and Fuji Media

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

The idea behind OBSERVE MEDICAL ASA and Fuji Media Holdings 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.