Correlation Between AAA Technologies and Orient Technologies

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

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

Diversification Opportunities for AAA Technologies and Orient Technologies

0.13

Correlation Coefficient

AAA Technologies  Orient Technologies

Average diversification

The 3 months correlation between AAA and Orient is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding AAA Technologies Limited and Orient Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orient Technologies and AAA Technologies 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 AAA Technologies Limited are associated (or correlated) with Orient Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orient Technologies has no effect on the direction of AAA Technologies i.e., AAA Technologies and Orient Technologies go up and down completely randomly.

Pair Corralation between AAA Technologies and Orient Technologies

Assuming the 90 days trading horizon AAA Technologies Limited is expected to under-perform the Orient Technologies. But the stock apears to be less risky and, when comparing its historical volatility, AAA Technologies Limited is 1.8 times less risky than Orient Technologies. The stock trades about -0.22 of its potential returns per unit of risk. The Orient Technologies Limited is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  39,845  in Orient Technologies Limited on November 29, 2024 and sell it today you would lose (6,880) from holding Orient Technologies Limited or give up 17.27% of portfolio value over 90 days.

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

AAA Technologies Limited  vs.  Orient Technologies Limited

AAA Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days AAA Technologies Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in March 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Orient Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Orient Technologies Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with AAA Technologies and Orient Technologies

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

The idea behind AAA Technologies Limited and Orient Technologies Limited 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.