Correlation Between OBSERVE MEDICAL and ZTO EXPRESS

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

Diversification Opportunities for OBSERVE MEDICAL and ZTO EXPRESS

0.05

Correlation Coefficient

OBSERVE MEDICAL  ZTO EXPRESS

Significant diversification

The 3 months correlation between OBSERVE and ZTO is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding OBSERVE MEDICAL ASA and ZTO EXPRESS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZTO EXPRESS 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 ZTO EXPRESS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZTO EXPRESS has no effect on the direction of OBSERVE MEDICAL i.e., OBSERVE MEDICAL and ZTO EXPRESS go up and down completely randomly.

Pair Corralation between OBSERVE MEDICAL and ZTO EXPRESS

Assuming the 90 days trading horizon OBSERVE MEDICAL ASA is expected to generate 5.78 times more return on investment than ZTO EXPRESS. However, OBSERVE MEDICAL is 5.78 times more volatile than ZTO EXPRESS. It trades about 0.0 of its potential returns per unit of risk. ZTO EXPRESS is currently generating about 0.01 per unit of risk. If you would invest  45.00  in OBSERVE MEDICAL ASA on December 20, 2024 and sell it today you would lose (15.00) from holding OBSERVE MEDICAL ASA or give up 33.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.61%
Values	Daily Returns

OBSERVE MEDICAL ASA  vs.  ZTO EXPRESS

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

ZTO EXPRESS

Risk-Adjusted Performance

Very Weak

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

Pair Trading with OBSERVE MEDICAL and ZTO EXPRESS

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

The idea behind OBSERVE MEDICAL ASA and ZTO EXPRESS 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.