Correlation Between Top Material and Oriental Precision

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

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

Diversification Opportunities for Top Material and Oriental Precision

0.0

Correlation Coefficient

Top Material  Oriental Precision

Pay attention - limited upside

The 3 months correlation between Top and Oriental is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Top Material Co and Oriental Precision Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oriental Precision and Top Material 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 Top Material Co 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 Top Material i.e., Top Material and Oriental Precision go up and down completely randomly.

Pair Corralation between Top Material and Oriental Precision

If you would invest (100.00) in Oriental Precision Engineering on October 22, 2024 and sell it today you would earn a total of  100.00  from holding Oriental Precision Engineering or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Top Material Co  vs.  Oriental Precision Engineering

Top Material

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Top Material 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.

Oriental Precision

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Oriental Precision Engineering has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Oriental Precision is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Top Material and Oriental Precision

The main advantage of trading using opposite Top Material and Oriental Precision positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Top Material 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 Top Material Co 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.