Correlation Between OBSERVE MEDICAL and UTD OV

Can any of the company-specific risk be diversified away by investing in both OBSERVE MEDICAL and UTD OV 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 UTD OV 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 UTD OV BK LOC ADR1, you can compare the effects of market volatilities on OBSERVE MEDICAL and UTD OV 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 UTD OV. Check out your portfolio center. Please also check ongoing floating volatility patterns of OBSERVE MEDICAL and UTD OV.

Diversification Opportunities for OBSERVE MEDICAL and UTD OV

0.2

Correlation Coefficient

OBSERVE MEDICAL  UTD OV

Modest diversification

The 3 months correlation between OBSERVE and UTD is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding OBSERVE MEDICAL ASA and UTD OV BK LOC ADR1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UTD OV BK 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 UTD OV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UTD OV BK has no effect on the direction of OBSERVE MEDICAL i.e., OBSERVE MEDICAL and UTD OV go up and down completely randomly.

Pair Corralation between OBSERVE MEDICAL and UTD OV

Assuming the 90 days trading horizon OBSERVE MEDICAL ASA is expected to generate 29.46 times more return on investment than UTD OV. However, OBSERVE MEDICAL is 29.46 times more volatile than UTD OV BK LOC ADR1. It trades about 0.07 of its potential returns per unit of risk. UTD OV BK LOC ADR1 is currently generating about 0.07 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	Very Weak
Accuracy	100.0%
Values	Daily Returns

OBSERVE MEDICAL ASA  vs.  UTD OV BK LOC ADR1

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

UTD OV BK

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in UTD OV BK LOC ADR1 are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, UTD OV reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with OBSERVE MEDICAL and UTD OV

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

The idea behind OBSERVE MEDICAL ASA and UTD OV BK LOC ADR1 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.