Correlation Between Cube Entertainment and Oriental Precision

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

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

Diversification Opportunities for Cube Entertainment and Oriental Precision

0.83

Correlation Coefficient

Cube Entertainment  Oriental Precision

Very poor diversification

The 3 months correlation between Cube and Oriental is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Cube Entertainment and Oriental Precision Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oriental Precision and Cube Entertainment 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 Cube Entertainment are associated (or correlated) with Oriental Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oriental Precision has no effect on the direction of Cube Entertainment i.e., Cube Entertainment and Oriental Precision go up and down completely randomly.

Pair Corralation between Cube Entertainment and Oriental Precision

Assuming the 90 days trading horizon Cube Entertainment is expected to generate 1.05 times less return on investment than Oriental Precision. But when comparing it to its historical volatility, Cube Entertainment is 1.02 times less risky than Oriental Precision. It trades about 0.08 of its potential returns per unit of risk. Oriental Precision Engineering is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  498,500  in Oriental Precision Engineering on September 23, 2024 and sell it today you would earn a total of  27,500  from holding Oriental Precision Engineering or generate 5.52% return on investment over 90 days.

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

Cube Entertainment  vs.  Oriental Precision Engineering

Cube Entertainment

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cube Entertainment are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cube Entertainment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Oriental Precision

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with Cube Entertainment and Oriental Precision

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

The idea behind Cube Entertainment and Oriental Precision Engineering 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.