Correlation Between Alien Metals and Ondine Biomedical

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

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

Diversification Opportunities for Alien Metals and Ondine Biomedical

-0.04

Correlation Coefficient

Alien Metals  Ondine Biomedical

Good diversification

The 3 months correlation between Alien and Ondine is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Alien Metals and Ondine Biomedical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ondine Biomedical and Alien Metals 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 Alien Metals are associated (or correlated) with Ondine Biomedical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ondine Biomedical has no effect on the direction of Alien Metals i.e., Alien Metals and Ondine Biomedical go up and down completely randomly.

Pair Corralation between Alien Metals and Ondine Biomedical

Assuming the 90 days trading horizon Alien Metals is expected to under-perform the Ondine Biomedical. But the stock apears to be less risky and, when comparing its historical volatility, Alien Metals is 1.13 times less risky than Ondine Biomedical. The stock trades about -0.14 of its potential returns per unit of risk. The Ondine Biomedical is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest  775.00  in Ondine Biomedical on October 11, 2024 and sell it today you would earn a total of  125.00  from holding Ondine Biomedical or generate 16.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Alien Metals  vs.  Ondine Biomedical

Alien Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alien Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Ondine Biomedical

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ondine Biomedical are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Ondine Biomedical exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alien Metals and Ondine Biomedical

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

The idea behind Alien Metals and Ondine Biomedical 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.