Correlation Between TSI and Orbitech

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

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

Diversification Opportunities for TSI and Orbitech

0.69

Correlation Coefficient

TSI  Orbitech

Poor diversification

The 3 months correlation between TSI and Orbitech is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding TSI Co and Orbitech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orbitech and TSI 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 TSI Co 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 TSI i.e., TSI and Orbitech go up and down completely randomly.

Pair Corralation between TSI and Orbitech

Assuming the 90 days trading horizon TSI Co is expected to generate 1.06 times more return on investment than Orbitech. However, TSI is 1.06 times more volatile than Orbitech Co. It trades about -0.01 of its potential returns per unit of risk. Orbitech Co is currently generating about -0.04 per unit of risk. If you would invest  934,000  in TSI Co on October 11, 2024 and sell it today you would lose (355,000) from holding TSI Co or give up 38.01% of portfolio value over 90 days.

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

TSI Co  vs.  Orbitech Co

TSI Co

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TSI 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 February 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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with TSI and Orbitech

The main advantage of trading using opposite TSI and Orbitech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TSI 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 TSI Co 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.