Correlation Between A1ME34 and Otis Worldwide

Can any of the company-specific risk be diversified away by investing in both A1ME34 and Otis Worldwide 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 A1ME34 and Otis Worldwide into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between A1ME34 and Otis Worldwide, you can compare the effects of market volatilities on A1ME34 and Otis Worldwide 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 A1ME34 with a short position of Otis Worldwide. Check out your portfolio center. Please also check ongoing floating volatility patterns of A1ME34 and Otis Worldwide.

Diversification Opportunities for A1ME34 and Otis Worldwide

0.54

Correlation Coefficient

A1ME34  Otis Worldwide

Very weak diversification

The 3 months correlation between A1ME34 and Otis is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding A1ME34 and Otis Worldwide in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Otis Worldwide and A1ME34 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 A1ME34 are associated (or correlated) with Otis Worldwide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Otis Worldwide has no effect on the direction of A1ME34 i.e., A1ME34 and Otis Worldwide go up and down completely randomly.

Pair Corralation between A1ME34 and Otis Worldwide

Assuming the 90 days trading horizon A1ME34 is expected to generate 1.5 times more return on investment than Otis Worldwide. However, A1ME34 is 1.5 times more volatile than Otis Worldwide. It trades about 0.15 of its potential returns per unit of risk. Otis Worldwide is currently generating about 0.1 per unit of risk. If you would invest  3,956  in A1ME34 on September 23, 2024 and sell it today you would earn a total of  814.00  from holding A1ME34 or generate 20.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.88%
Values	Daily Returns

A1ME34  vs.  Otis Worldwide

A1ME34

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in A1ME34 are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, A1ME34 sustained solid returns over the last few months and may actually be approaching a breakup point.

Otis Worldwide

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Otis Worldwide are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Otis Worldwide may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with A1ME34 and Otis Worldwide

The main advantage of trading using opposite A1ME34 and Otis Worldwide positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if A1ME34 position performs unexpectedly, Otis Worldwide 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 Otis Worldwide will offset losses from the drop in Otis Worldwide's long position.

The idea behind A1ME34 and Otis Worldwide 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.

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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.