Correlation Between OBSERVE MEDICAL and Auto Trader
Can any of the company-specific risk be diversified away by investing in both OBSERVE MEDICAL and Auto Trader 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 OBSERVE MEDICAL and Auto Trader into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between OBSERVE MEDICAL ASA and Auto Trader Group, you can compare the effects of market volatilities on OBSERVE MEDICAL and Auto Trader 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 OBSERVE MEDICAL with a short position of Auto Trader. Check out your portfolio center. Please also check ongoing floating volatility patterns of OBSERVE MEDICAL and Auto Trader.
Diversification Opportunities for OBSERVE MEDICAL and Auto Trader
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between OBSERVE and Auto is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding OBSERVE MEDICAL ASA and Auto Trader Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auto Trader Group and OBSERVE MEDICAL 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 OBSERVE MEDICAL ASA are associated (or correlated) with Auto Trader. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auto Trader Group has no effect on the direction of OBSERVE MEDICAL i.e., OBSERVE MEDICAL and Auto Trader go up and down completely randomly.
Pair Corralation between OBSERVE MEDICAL and Auto Trader
Assuming the 90 days trading horizon OBSERVE MEDICAL ASA is expected to generate 22.47 times more return on investment than Auto Trader. However, OBSERVE MEDICAL is 22.47 times more volatile than Auto Trader Group. It trades about 0.07 of its potential returns per unit of risk. Auto Trader Group is currently generating about 0.05 per unit of risk. If you would invest 19.00 in OBSERVE MEDICAL ASA on October 13, 2024 and sell it today you would lose (16.22) from holding OBSERVE MEDICAL ASA or give up 85.37% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
OBSERVE MEDICAL ASA vs. Auto Trader Group
Performance |
| Timeline |
| OBSERVE MEDICAL ASA |
| Auto Trader Group |
OBSERVE MEDICAL and Auto Trader Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with OBSERVE MEDICAL and Auto Trader
The main advantage of trading using opposite OBSERVE MEDICAL and Auto Trader positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OBSERVE MEDICAL position performs unexpectedly, Auto Trader 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 Auto Trader will offset losses from the drop in Auto Trader's long position.| OBSERVE MEDICAL vs. LANDSEA GREEN MANAGEMENT | OBSERVE MEDICAL vs. ULTRA CLEAN HLDGS | OBSERVE MEDICAL vs. CLEAN ENERGY FUELS | OBSERVE MEDICAL vs. Clean Energy Fuels |
| Auto Trader vs. CompuGroup Medical SE | Auto Trader vs. SK TELECOM TDADR | Auto Trader vs. Diamyd Medical AB | Auto Trader vs. INTERSHOP Communications Aktiengesellschaft |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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