Correlation Between OBSERVE MEDICAL and JAPAN AIRLINES

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

Diversification Opportunities for OBSERVE MEDICAL and JAPAN AIRLINES

-0.52

Correlation Coefficient

OBSERVE MEDICAL  JAPAN AIRLINES

Excellent diversification

The 3 months correlation between OBSERVE and JAPAN is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding OBSERVE MEDICAL ASA and JAPAN AIRLINES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JAPAN AIRLINES 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 JAPAN AIRLINES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JAPAN AIRLINES has no effect on the direction of OBSERVE MEDICAL i.e., OBSERVE MEDICAL and JAPAN AIRLINES go up and down completely randomly.

Pair Corralation between OBSERVE MEDICAL and JAPAN AIRLINES

Assuming the 90 days trading horizon OBSERVE MEDICAL is expected to generate 1.52 times less return on investment than JAPAN AIRLINES. In addition to that, OBSERVE MEDICAL is 9.59 times more volatile than JAPAN AIRLINES. It trades about 0.01 of its total potential returns per unit of risk. JAPAN AIRLINES is currently generating about 0.1 per unit of volatility. If you would invest  1,520  in JAPAN AIRLINES on December 21, 2024 and sell it today you would earn a total of  110.00  from holding JAPAN AIRLINES or generate 7.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.92%
Values	Daily Returns

OBSERVE MEDICAL ASA  vs.  JAPAN AIRLINES

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 newest stock price disturbance, may contribute to mid-run losses for the stockholders.

JAPAN AIRLINES

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JAPAN AIRLINES are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain essential indicators, JAPAN AIRLINES may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with OBSERVE MEDICAL and JAPAN AIRLINES

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

The idea behind OBSERVE MEDICAL ASA and JAPAN AIRLINES 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 Anywhere module to track or share privately all of your investments from the convenience of any device.