Correlation Between OBSERVE MEDICAL and Zhejiang Expressway

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

Diversification Opportunities for OBSERVE MEDICAL and Zhejiang Expressway

0.27

Correlation Coefficient

OBSERVE MEDICAL  Zhejiang Expressway

Modest diversification

The 3 months correlation between OBSERVE and Zhejiang is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding OBSERVE MEDICAL ASA and Zhejiang Expressway Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang Expressway 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 Zhejiang Expressway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang Expressway has no effect on the direction of OBSERVE MEDICAL i.e., OBSERVE MEDICAL and Zhejiang Expressway go up and down completely randomly.

Pair Corralation between OBSERVE MEDICAL and Zhejiang Expressway

Assuming the 90 days trading horizon OBSERVE MEDICAL ASA is expected to under-perform the Zhejiang Expressway. In addition to that, OBSERVE MEDICAL is 3.01 times more volatile than Zhejiang Expressway Co. It trades about -0.09 of its total potential returns per unit of risk. Zhejiang Expressway Co is currently generating about 0.3 per unit of volatility. If you would invest  63.00  in Zhejiang Expressway Co on October 8, 2024 and sell it today you would earn a total of  4.00  from holding Zhejiang Expressway Co or generate 6.35% return on investment over 90 days.

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

OBSERVE MEDICAL ASA  vs.  Zhejiang Expressway Co

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

Zhejiang Expressway

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang Expressway Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Zhejiang Expressway is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with OBSERVE MEDICAL and Zhejiang Expressway

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

The idea behind OBSERVE MEDICAL ASA and Zhejiang Expressway Co 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.

Check out your portfolio center.

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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.