Correlation Between OSE All and OBSERVE MEDICAL

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

Diversification Opportunities for OSE All and OBSERVE MEDICAL

0.0
  Correlation Coefficient

Pay attention - limited upside

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

If you would invest  0.00  in OBSERVE MEDICAL on July 9, 2022 and sell it today you would earn a total of  0.00  from holding OBSERVE MEDICAL or generate 0.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy4.35%
ValuesDaily Returns

OSE All  vs.  OBSERVE MEDICAL

 Performance (%) 
       Timeline  

OSE All and OBSERVE MEDICAL 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 OBSERVE MEDICAL

The main advantage of trading using opposite OSE All and OBSERVE MEDICAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OSE All position performs unexpectedly, OBSERVE MEDICAL 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 OBSERVE MEDICAL will offset losses from the drop in OBSERVE MEDICAL'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 OBSERVE MEDICAL 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

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