Correlation Between 111 and ODP Corp

Can any of the company-specific risk be diversified away by investing in both 111 and ODP Corp 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 111 and ODP Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 111 Inc and ODP Corp, you can compare the effects of market volatilities on 111 and ODP Corp 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 111 with a short position of ODP Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of 111 and ODP Corp.

Diversification Opportunities for 111 and ODP Corp

0.35

Correlation Coefficient

111  ODP Corp

Weak diversification

The 3 months correlation between 111 and ODP is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding 111 Inc and ODP Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ODP Corp and 111 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 111 Inc are associated (or correlated) with ODP Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ODP Corp has no effect on the direction of 111 i.e., 111 and ODP Corp go up and down completely randomly.

Pair Corralation between 111 and ODP Corp

Allowing for the 90-day total investment horizon 111 Inc is expected to generate 3.31 times more return on investment than ODP Corp. However, 111 is 3.31 times more volatile than ODP Corp. It trades about 0.11 of its potential returns per unit of risk. ODP Corp is currently generating about -0.02 per unit of risk. If you would invest  56.00  in 111 Inc on September 16, 2024 and sell it today you would earn a total of  27.00  from holding 111 Inc or generate 48.21% return on investment over 90 days.

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

111 Inc  vs.  ODP Corp

111 Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in 111 Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, 111 demonstrated solid returns over the last few months and may actually be approaching a breakup point.

ODP Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ODP Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, ODP Corp is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with 111 and ODP Corp

The main advantage of trading using opposite 111 and ODP Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 111 position performs unexpectedly, ODP Corp 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 ODP Corp will offset losses from the drop in ODP Corp's long position.

The idea behind 111 Inc and ODP Corp 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.