Correlation Between Oatly Group and Safety Shot

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

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

Diversification Opportunities for Oatly Group and Safety Shot

0.6

Correlation Coefficient

Oatly Group  Safety Shot

Poor diversification

The 3 months correlation between Oatly and Safety is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Oatly Group AB and Safety Shot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Safety Shot and Oatly Group 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 Oatly Group AB are associated (or correlated) with Safety Shot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Safety Shot has no effect on the direction of Oatly Group i.e., Oatly Group and Safety Shot go up and down completely randomly.

Pair Corralation between Oatly Group and Safety Shot

Given the investment horizon of 90 days Oatly Group AB is expected to under-perform the Safety Shot. But the stock apears to be less risky and, when comparing its historical volatility, Oatly Group AB is 4.3 times less risky than Safety Shot. The stock trades about -0.07 of its potential returns per unit of risk. The Safety Shot is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  22.00  in Safety Shot on October 1, 2024 and sell it today you would lose (4.00) from holding Safety Shot or give up 18.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	90.48%
Values	Daily Returns

Oatly Group AB  vs.  Safety Shot

Oatly Group AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oatly Group AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Safety Shot

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Safety Shot are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Safety Shot showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Oatly Group and Safety Shot

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

The idea behind Oatly Group AB and Safety Shot 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.