Correlation Between Hana Materials and Orbitech

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

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

Diversification Opportunities for Hana Materials and Orbitech

0.39

Correlation Coefficient

Hana Materials  Orbitech

Weak diversification

The 3 months correlation between Hana and Orbitech is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Hana Materials and Orbitech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orbitech and Hana Materials 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 Hana Materials are associated (or correlated) with Orbitech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orbitech has no effect on the direction of Hana Materials i.e., Hana Materials and Orbitech go up and down completely randomly.

Pair Corralation between Hana Materials and Orbitech

Assuming the 90 days trading horizon Hana Materials is expected to under-perform the Orbitech. But the stock apears to be less risky and, when comparing its historical volatility, Hana Materials is 1.15 times less risky than Orbitech. The stock trades about -0.17 of its potential returns per unit of risk. The Orbitech Co is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  225,500  in Orbitech Co on September 12, 2024 and sell it today you would lose (40,100) from holding Orbitech Co or give up 17.78% of portfolio value over 90 days.

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

Hana Materials  vs.  Orbitech Co

Hana Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hana Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat 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.

Orbitech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Orbitech Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat 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.

Pair Trading with Hana Materials and Orbitech

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

The idea behind Hana Materials and Orbitech Co 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.