Correlation Between CERo Therapeutics and Obayashi

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

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

Diversification Opportunities for CERo Therapeutics and Obayashi

0.58

Correlation Coefficient

CERo Therapeutics  Obayashi

Very weak diversification

The 3 months correlation between CERo and Obayashi is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding CERo Therapeutics Holdings and Obayashi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Obayashi and CERo Therapeutics 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 CERo Therapeutics Holdings are associated (or correlated) with Obayashi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Obayashi has no effect on the direction of CERo Therapeutics i.e., CERo Therapeutics and Obayashi go up and down completely randomly.

Pair Corralation between CERo Therapeutics and Obayashi

Assuming the 90 days horizon CERo Therapeutics Holdings is expected to generate 18.72 times more return on investment than Obayashi. However, CERo Therapeutics is 18.72 times more volatile than Obayashi. It trades about 0.09 of its potential returns per unit of risk. Obayashi is currently generating about 0.08 per unit of risk. If you would invest  7.00  in CERo Therapeutics Holdings on September 24, 2024 and sell it today you would lose (6.10) from holding CERo Therapeutics Holdings or give up 87.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	32.93%
Values	Daily Returns

CERo Therapeutics Holdings  vs.  Obayashi

CERo Therapeutics

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CERo Therapeutics Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, CERo Therapeutics showed solid returns over the last few months and may actually be approaching a breakup point.

Obayashi

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Obayashi are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating fundamental indicators, Obayashi reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CERo Therapeutics and Obayashi

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

The idea behind CERo Therapeutics Holdings and Obayashi 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.