Correlation Between Oscotec and Medy Tox
Can any of the company-specific risk be diversified away by investing in both Oscotec and Medy Tox 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 Oscotec and Medy Tox into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Oscotec and Medy Tox, you can compare the effects of market volatilities on Oscotec and Medy Tox 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 Oscotec with a short position of Medy Tox. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oscotec and Medy Tox.
Diversification Opportunities for Oscotec and Medy Tox
Poor diversification
The 3 months correlation between Oscotec and Medy is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Oscotec and Medy Tox in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medy Tox and Oscotec 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 Oscotec are associated (or correlated) with Medy Tox. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medy Tox has no effect on the direction of Oscotec i.e., Oscotec and Medy Tox go up and down completely randomly.
Pair Corralation between Oscotec and Medy Tox
Assuming the 90 days trading horizon Oscotec is expected to generate 1.07 times more return on investment than Medy Tox. However, Oscotec is 1.07 times more volatile than Medy Tox. It trades about 0.25 of its potential returns per unit of risk. Medy Tox is currently generating about -0.1 per unit of risk. If you would invest 2,445,000 in Oscotec on October 24, 2024 and sell it today you would earn a total of 260,000 from holding Oscotec or generate 10.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Oscotec vs. Medy Tox
Performance |
| Timeline |
| Oscotec |
| Medy Tox |
Oscotec and Medy Tox Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Oscotec and Medy Tox
The main advantage of trading using opposite Oscotec and Medy Tox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oscotec position performs unexpectedly, Medy Tox 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 Medy Tox will offset losses from the drop in Medy Tox's long position.The idea behind Oscotec and Medy Tox 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.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 the Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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