Correlation Between OBSERVE MEDICAL and Northern Data
Can any of the company-specific risk be diversified away by investing in both OBSERVE MEDICAL and Northern Data 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 Northern Data 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 Northern Data AG, you can compare the effects of market volatilities on OBSERVE MEDICAL and Northern Data 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 Northern Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of OBSERVE MEDICAL and Northern Data.
Diversification Opportunities for OBSERVE MEDICAL and Northern Data
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between OBSERVE and Northern is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding OBSERVE MEDICAL ASA and Northern Data AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Data AG 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 Northern Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Data AG has no effect on the direction of OBSERVE MEDICAL i.e., OBSERVE MEDICAL and Northern Data go up and down completely randomly.
Pair Corralation between OBSERVE MEDICAL and Northern Data
Assuming the 90 days trading horizon OBSERVE MEDICAL ASA is expected to generate 4.68 times more return on investment than Northern Data. However, OBSERVE MEDICAL is 4.68 times more volatile than Northern Data AG. It trades about 0.04 of its potential returns per unit of risk. Northern Data AG is currently generating about 0.03 per unit of risk. If you would invest 41.00 in OBSERVE MEDICAL ASA on October 31, 2024 and sell it today you would lose (6.00) from holding OBSERVE MEDICAL ASA or give up 14.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
OBSERVE MEDICAL ASA vs. Northern Data AG
Performance |
| Timeline |
| OBSERVE MEDICAL ASA |
| Northern Data AG |
OBSERVE MEDICAL and Northern Data Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with OBSERVE MEDICAL and Northern Data
The main advantage of trading using opposite OBSERVE MEDICAL and Northern Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OBSERVE MEDICAL position performs unexpectedly, Northern Data 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 Northern Data will offset losses from the drop in Northern Data's long position.| OBSERVE MEDICAL vs. Abbott Laboratories | OBSERVE MEDICAL vs. Abbott Laboratories | OBSERVE MEDICAL vs. Medtronic PLC | OBSERVE MEDICAL vs. Stryker |
| Northern Data vs. PREMIER FOODS | Northern Data vs. Cal Maine Foods | Northern Data vs. THAI BEVERAGE | Northern Data vs. National Beverage Corp |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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