Correlation Between Onyx Healthcare and Allied Industrial
Can any of the company-specific risk be diversified away by investing in both Onyx Healthcare and Allied Industrial 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 Onyx Healthcare and Allied Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Onyx Healthcare and Allied Industrial, you can compare the effects of market volatilities on Onyx Healthcare and Allied Industrial 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 Onyx Healthcare with a short position of Allied Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Onyx Healthcare and Allied Industrial.
Diversification Opportunities for Onyx Healthcare and Allied Industrial
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Onyx and Allied is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Onyx Healthcare and Allied Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allied Industrial and Onyx Healthcare 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 Onyx Healthcare are associated (or correlated) with Allied Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allied Industrial has no effect on the direction of Onyx Healthcare i.e., Onyx Healthcare and Allied Industrial go up and down completely randomly.
Pair Corralation between Onyx Healthcare and Allied Industrial
Assuming the 90 days trading horizon Onyx Healthcare is expected to generate 1.24 times more return on investment than Allied Industrial. However, Onyx Healthcare is 1.24 times more volatile than Allied Industrial. It trades about 0.18 of its potential returns per unit of risk. Allied Industrial is currently generating about -0.27 per unit of risk. If you would invest 15,300 in Onyx Healthcare on November 3, 2024 and sell it today you would earn a total of 1,000.00 from holding Onyx Healthcare or generate 6.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Onyx Healthcare vs. Allied Industrial
Performance |
| Timeline |
| Onyx Healthcare |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
| Allied Industrial |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Onyx Healthcare and Allied Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Onyx Healthcare and Allied Industrial
The main advantage of trading using opposite Onyx Healthcare and Allied Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Onyx Healthcare position performs unexpectedly, Allied Industrial 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 Allied Industrial will offset losses from the drop in Allied Industrial's long position.The idea behind Onyx Healthcare and Allied Industrial 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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