Correlation Between Osaka Steel and Arrow Financial

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

By analyzing existing cross correlation between Osaka Steel Co, and Arrow Financial, you can compare the effects of market volatilities on Osaka Steel and Arrow Financial 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 Osaka Steel with a short position of Arrow Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Osaka Steel and Arrow Financial.

Diversification Opportunities for Osaka Steel and Arrow Financial

0.29

Correlation Coefficient

Osaka Steel  Arrow Financial

Modest diversification

The 3 months correlation between Osaka and Arrow is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Osaka Steel Co, and Arrow Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Financial and Osaka Steel 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 Osaka Steel Co, are associated (or correlated) with Arrow Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow Financial has no effect on the direction of Osaka Steel i.e., Osaka Steel and Arrow Financial go up and down completely randomly.

Pair Corralation between Osaka Steel and Arrow Financial

Assuming the 90 days horizon Osaka Steel is expected to generate 5.56 times less return on investment than Arrow Financial. But when comparing it to its historical volatility, Osaka Steel Co, is 42.67 times less risky than Arrow Financial. It trades about 0.06 of its potential returns per unit of risk. Arrow Financial is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  3,010  in Arrow Financial on September 24, 2024 and sell it today you would lose (110.00) from holding Arrow Financial or give up 3.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Osaka Steel Co,  vs.  Arrow Financial

Osaka Steel Co,

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Osaka Steel Co, are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Osaka Steel is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Arrow Financial

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Arrow Financial are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Arrow Financial is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Osaka Steel and Arrow Financial

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

The idea behind Osaka Steel Co, and Arrow Financial 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.