Correlation Between Fortescue Metals and OBSERVE MEDICAL
Can any of the company-specific risk be diversified away by investing in both Fortescue Metals 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 Fortescue Metals and OBSERVE MEDICAL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fortescue Metals Group and OBSERVE MEDICAL ASA, you can compare the effects of market volatilities on Fortescue Metals 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 Fortescue Metals with a short position of OBSERVE MEDICAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortescue Metals and OBSERVE MEDICAL.
Diversification Opportunities for Fortescue Metals and OBSERVE MEDICAL
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Fortescue and OBSERVE is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Fortescue Metals Group 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 Fortescue Metals 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 Fortescue Metals Group 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 Fortescue Metals i.e., Fortescue Metals and OBSERVE MEDICAL go up and down completely randomly.
Pair Corralation between Fortescue Metals and OBSERVE MEDICAL
Assuming the 90 days horizon Fortescue Metals Group is expected to under-perform the OBSERVE MEDICAL. But the stock apears to be less risky and, when comparing its historical volatility, Fortescue Metals Group is 2.21 times less risky than OBSERVE MEDICAL. The stock trades about -0.52 of its potential returns per unit of risk. The OBSERVE MEDICAL ASA is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest 3.00 in OBSERVE MEDICAL ASA on October 11, 2024 and sell it today you would lose (0.18) from holding OBSERVE MEDICAL ASA or give up 6.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fortescue Metals Group vs. OBSERVE MEDICAL ASA
Performance |
| Timeline |
| Fortescue Metals |
| OBSERVE MEDICAL ASA |
Fortescue Metals and OBSERVE MEDICAL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fortescue Metals and OBSERVE MEDICAL
The main advantage of trading using opposite Fortescue Metals and OBSERVE MEDICAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortescue Metals 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.| Fortescue Metals vs. Sinopec Shanghai Petrochemical | Fortescue Metals vs. Mitsui Chemicals | Fortescue Metals vs. EBRO FOODS | Fortescue Metals vs. X FAB Silicon Foundries |
| OBSERVE MEDICAL vs. Clean Energy Fuels | OBSERVE MEDICAL vs. Singapore Telecommunications Limited | OBSERVE MEDICAL vs. Goodyear Tire Rubber | OBSERVE MEDICAL vs. GEELY AUTOMOBILE |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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