Correlation Between Virtu Financial and OBSERVE MEDICAL

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

Diversification Opportunities for Virtu Financial and OBSERVE MEDICAL

0.42
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Virtu and OBSERVE is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Virtu Financial and OBSERVE MEDICAL ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OBSERVE MEDICAL ASA and Virtu Financial 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 Virtu Financial 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 ASA has no effect on the direction of Virtu Financial i.e., Virtu Financial and OBSERVE MEDICAL go up and down completely randomly.

Pair Corralation between Virtu Financial and OBSERVE MEDICAL

Assuming the 90 days horizon Virtu Financial is expected to generate 0.12 times more return on investment than OBSERVE MEDICAL. However, Virtu Financial is 8.12 times less risky than OBSERVE MEDICAL. It trades about 0.06 of its potential returns per unit of risk. OBSERVE MEDICAL ASA is currently generating about -0.13 per unit of risk. If you would invest  3,258  in Virtu Financial on October 17, 2024 and sell it today you would earn a total of  122.00  from holding Virtu Financial or generate 3.74% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Virtu Financial  vs.  OBSERVE MEDICAL ASA

 Performance 
       Timeline  
Virtu Financial 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Virtu Financial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Virtu Financial reported solid returns over the last few months and may actually be approaching a breakup point.
OBSERVE MEDICAL ASA 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days OBSERVE MEDICAL ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Virtu Financial and OBSERVE MEDICAL Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Virtu Financial and OBSERVE MEDICAL

The main advantage of trading using opposite Virtu Financial and OBSERVE MEDICAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Virtu Financial 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 idea behind Virtu Financial and OBSERVE MEDICAL ASA 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.

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