Correlation Between OSE Pharma and Adocia

Can any of the company-specific risk be diversified away by investing in both OSE Pharma and Adocia 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 OSE Pharma and Adocia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between OSE Pharma SA and Adocia, you can compare the effects of market volatilities on OSE Pharma and Adocia 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 OSE Pharma with a short position of Adocia. Check out your portfolio center. Please also check ongoing floating volatility patterns of OSE Pharma and Adocia.

Diversification Opportunities for OSE Pharma and Adocia

0.69

Correlation Coefficient

OSE Pharma  Adocia

Poor diversification

The 3 months correlation between OSE and Adocia is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding OSE Pharma SA and Adocia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adocia and OSE Pharma 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 OSE Pharma SA are associated (or correlated) with Adocia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adocia has no effect on the direction of OSE Pharma i.e., OSE Pharma and Adocia go up and down completely randomly.

Pair Corralation between OSE Pharma and Adocia

Assuming the 90 days trading horizon OSE Pharma SA is expected to under-perform the Adocia. But the stock apears to be less risky and, when comparing its historical volatility, OSE Pharma SA is 1.68 times less risky than Adocia. The stock trades about -0.02 of its potential returns per unit of risk. The Adocia is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  576.00  in Adocia on September 26, 2024 and sell it today you would earn a total of  22.00  from holding Adocia or generate 3.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

OSE Pharma SA  vs.  Adocia

OSE Pharma SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days OSE Pharma SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, OSE Pharma is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Adocia

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Adocia are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Adocia sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with OSE Pharma and Adocia

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

The idea behind OSE Pharma SA and Adocia 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.