Correlation Between Otsuka and Micro Focus

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

Diversification Opportunities for Otsuka and Micro Focus

-0.43
  Correlation Coefficient

Very good diversification

The 3 months correlation between Otsuka and Micro is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Otsuka and Micro Focus International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micro Focus International and Otsuka 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 Otsuka are associated (or correlated) with Micro Focus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micro Focus International has no effect on the direction of Otsuka i.e., Otsuka and Micro Focus go up and down completely randomly.

Pair Corralation between Otsuka and Micro Focus

Assuming the 90 days horizon Otsuka is expected to under-perform the Micro Focus. In addition to that, Otsuka is 1.4 times more volatile than Micro Focus International. It trades about -0.22 of its total potential returns per unit of risk. Micro Focus International is currently generating about 0.27 per unit of volatility. If you would invest  588.00  in Micro Focus International on September 3, 2022 and sell it today you would earn a total of  47.00  from holding Micro Focus International or generate 7.99% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy90.91%
ValuesDaily Returns

Otsuka  vs.  Micro Focus International

 Performance (%) 
       Timeline  
Otsuka 
Otsuka Performance
0 of 100
Over the last 90 days Otsuka has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's forward-looking signals remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Otsuka Price Channel

Micro Focus International 
Micro Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Micro Focus International are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady technical and fundamental indicators, Micro Focus may actually be approaching a critical reversion point that can send shares even higher in January 2023.

Micro Price Channel

Otsuka and Micro Focus Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Otsuka and Micro Focus

The main advantage of trading using opposite Otsuka and Micro Focus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Otsuka position performs unexpectedly, Micro Focus 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 Micro Focus will offset losses from the drop in Micro Focus' long position.
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The idea behind Otsuka and Micro Focus International 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 Commodity Channel Index module to use Commodity Channel Index to analyze current equity momentum.

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