Correlation Between OSE All and OBBK08 PRO

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Can any of the company-specific risk be diversified away by investing in both OSE All and OBBK08 PRO 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 All and OBBK08 PRO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between OSE All and OBBK08 PRO, you can compare the effects of market volatilities on OSE All and OBBK08 PRO 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 All with a short position of OBBK08 PRO. Check out your portfolio center. Please also check ongoing floating volatility patterns of OSE All and OBBK08 PRO.

Diversification Opportunities for OSE All and OBBK08 PRO

0.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between OSEAX and OBBK08 is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding OSE All and OBBK08 PRO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OBBK08 PRO and OSE All 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 All are associated (or correlated) with OBBK08 PRO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OBBK08 PRO has no effect on the direction of OSE All i.e., OSE All and OBBK08 PRO go up and down completely randomly.
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Pair Corralation between OSE All and OBBK08 PRO

If you would invest  108,935  in OSE All on July 7, 2022 and sell it today you would lose (7,198)  from holding OSE All or give up 6.61% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy0.0%
ValuesDaily Returns

OSE All  vs.  OBBK08 PRO

 Performance (%) 
       Timeline  

OSE All and OBBK08 PRO Volatility Contrast

   Predicted Return Density   
       Returns  

OSE All

Pair trading matchups for OSE All

The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against OSE All as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. OSE All's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, OSE All's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to OSE All.

Pair Trading with OSE All and OBBK08 PRO

The main advantage of trading using opposite OSE All and OBBK08 PRO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OSE All position performs unexpectedly, OBBK08 PRO 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 OBBK08 PRO will offset losses from the drop in OBBK08 PRO's long position.
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against OSE All as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. OSE All's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, OSE All's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to OSE All.
The idea behind OSE All and OBBK08 PRO 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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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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