Correlation Between OSX Brasil and A1LK34

Can any of the company-specific risk be diversified away by investing in both OSX Brasil and A1LK34 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 OSX Brasil and A1LK34 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between OSX Brasil SA and A1LK34, you can compare the effects of market volatilities on OSX Brasil and A1LK34 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 OSX Brasil with a short position of A1LK34. Check out your portfolio center. Please also check ongoing floating volatility patterns of OSX Brasil and A1LK34.

Diversification Opportunities for OSX Brasil and A1LK34

-0.64

Correlation Coefficient

OSX Brasil  A1LK34

Excellent diversification

The 3 months correlation between OSX and A1LK34 is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding OSX Brasil SA and A1LK34 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on A1LK34 and OSX Brasil 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 OSX Brasil SA are associated (or correlated) with A1LK34. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of A1LK34 has no effect on the direction of OSX Brasil i.e., OSX Brasil and A1LK34 go up and down completely randomly.

Pair Corralation between OSX Brasil and A1LK34

Assuming the 90 days trading horizon OSX Brasil SA is expected to under-perform the A1LK34. But the stock apears to be less risky and, when comparing its historical volatility, OSX Brasil SA is 1.23 times less risky than A1LK34. The stock trades about -0.01 of its potential returns per unit of risk. The A1LK34 is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  22,500  in A1LK34 on September 26, 2024 and sell it today you would earn a total of  18,940  from holding A1LK34 or generate 84.18% return on investment over 90 days.

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

OSX Brasil SA  vs.  A1LK34

OSX Brasil SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days OSX Brasil SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, OSX Brasil is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

A1LK34

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in A1LK34 are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, A1LK34 sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with OSX Brasil and A1LK34

The main advantage of trading using opposite OSX Brasil and A1LK34 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OSX Brasil position performs unexpectedly, A1LK34 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 A1LK34 will offset losses from the drop in A1LK34's long position.

The idea behind OSX Brasil SA and A1LK34 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.