Correlation Between EirGenix and OBI Pharma
Can any of the company-specific risk be diversified away by investing in both EirGenix and OBI Pharma 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 EirGenix and OBI Pharma into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EirGenix and OBI Pharma, you can compare the effects of market volatilities on EirGenix and OBI Pharma 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 EirGenix with a short position of OBI Pharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of EirGenix and OBI Pharma.
Diversification Opportunities for EirGenix and OBI Pharma
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between EirGenix and OBI is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding EirGenix and OBI Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OBI Pharma and EirGenix 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 EirGenix are associated (or correlated) with OBI Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OBI Pharma has no effect on the direction of EirGenix i.e., EirGenix and OBI Pharma go up and down completely randomly.
Pair Corralation between EirGenix and OBI Pharma
Assuming the 90 days trading horizon EirGenix is expected to generate 1.05 times more return on investment than OBI Pharma. However, EirGenix is 1.05 times more volatile than OBI Pharma. It trades about -0.05 of its potential returns per unit of risk. OBI Pharma is currently generating about -0.11 per unit of risk. If you would invest 8,950 in EirGenix on August 28, 2024 and sell it today you would lose (130.00) from holding EirGenix or give up 1.45% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
EirGenix vs. OBI Pharma
Performance |
| Timeline |
| EirGenix |
| OBI Pharma |
EirGenix and OBI Pharma Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EirGenix and OBI Pharma
The main advantage of trading using opposite EirGenix and OBI Pharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EirGenix position performs unexpectedly, OBI Pharma 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 OBI Pharma will offset losses from the drop in OBI Pharma's long position.The idea behind EirGenix and OBI Pharma 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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