Correlation Between OBSERVE MEDICAL and INSURANCE AUST

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

Diversification Opportunities for OBSERVE MEDICAL and INSURANCE AUST

0.55

Correlation Coefficient

OBSERVE MEDICAL  INSURANCE AUST

Very weak diversification

The 3 months correlation between OBSERVE and INSURANCE is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding OBSERVE MEDICAL ASA and INSURANCE AUST GRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INSURANCE AUST GRP 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 INSURANCE AUST. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INSURANCE AUST GRP has no effect on the direction of OBSERVE MEDICAL i.e., OBSERVE MEDICAL and INSURANCE AUST go up and down completely randomly.

Pair Corralation between OBSERVE MEDICAL and INSURANCE AUST

Assuming the 90 days trading horizon OBSERVE MEDICAL ASA is expected to generate 2.73 times more return on investment than INSURANCE AUST. However, OBSERVE MEDICAL is 2.73 times more volatile than INSURANCE AUST GRP. It trades about 0.11 of its potential returns per unit of risk. INSURANCE AUST GRP is currently generating about 0.2 per unit of risk. If you would invest  2.42  in OBSERVE MEDICAL ASA on October 6, 2024 and sell it today you would earn a total of  0.40  from holding OBSERVE MEDICAL ASA or generate 16.53% return on investment over 90 days.

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

OBSERVE MEDICAL ASA  vs.  INSURANCE AUST GRP

OBSERVE MEDICAL ASA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in OBSERVE MEDICAL ASA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, OBSERVE MEDICAL is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

INSURANCE AUST GRP

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in INSURANCE AUST GRP are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, INSURANCE AUST may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with OBSERVE MEDICAL and INSURANCE AUST

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

The idea behind OBSERVE MEDICAL ASA and INSURANCE AUST GRP 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.