Correlation Between OSI Systems and PARTS ID

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

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

Diversification Opportunities for OSI Systems and PARTS ID

-0.36

Correlation Coefficient

OSI Systems  PARTS ID

Very good diversification

The 3 months correlation between OSI and PARTS is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding OSI Systems and PARTS ID in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PARTS ID and OSI Systems 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 OSI Systems are associated (or correlated) with PARTS ID. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PARTS ID has no effect on the direction of OSI Systems i.e., OSI Systems and PARTS ID go up and down completely randomly.

Pair Corralation between OSI Systems and PARTS ID

Given the investment horizon of 90 days OSI Systems is expected to generate 5.52 times less return on investment than PARTS ID. But when comparing it to its historical volatility, OSI Systems is 3.36 times less risky than PARTS ID. It trades about 0.05 of its potential returns per unit of risk. PARTS ID is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  37.00  in PARTS ID on October 24, 2024 and sell it today you would earn a total of  5.00  from holding PARTS ID or generate 13.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	8.76%
Values	Daily Returns

OSI Systems  vs.  PARTS ID

OSI Systems

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in OSI Systems are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating forward indicators, OSI Systems unveiled solid returns over the last few months and may actually be approaching a breakup point.

PARTS ID

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PARTS ID has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, PARTS ID is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with OSI Systems and PARTS ID

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

The idea behind OSI Systems and PARTS ID 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.