Correlation Between Centrifuge and Osmosis

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

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

Diversification Opportunities for Centrifuge and Osmosis

0.7

Correlation Coefficient

Centrifuge  Osmosis

Poor diversification

The 3 months correlation between Centrifuge and Osmosis is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Centrifuge and Osmosis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Osmosis and Centrifuge 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 Centrifuge are associated (or correlated) with Osmosis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Osmosis has no effect on the direction of Centrifuge i.e., Centrifuge and Osmosis go up and down completely randomly.

Pair Corralation between Centrifuge and Osmosis

Assuming the 90 days trading horizon Centrifuge is expected to generate 1.98 times less return on investment than Osmosis. But when comparing it to its historical volatility, Centrifuge is 1.02 times less risky than Osmosis. It trades about 0.08 of its potential returns per unit of risk. Osmosis is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  37.00  in Osmosis on September 1, 2024 and sell it today you would earn a total of  22.00  from holding Osmosis or generate 59.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Centrifuge  vs.  Osmosis

Centrifuge

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Centrifuge are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Centrifuge exhibited solid returns over the last few months and may actually be approaching a breakup point.

Osmosis

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Osmosis are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Osmosis exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Centrifuge and Osmosis

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

The idea behind Centrifuge and Osmosis 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.