Correlation Between Cambridge Technology and Orient Technologies

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

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

Diversification Opportunities for Cambridge Technology and Orient Technologies

-0.49

Correlation Coefficient

Cambridge Technology  Orient Technologies

Very good diversification

The 3 months correlation between Cambridge and Orient is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Cambridge Technology Enterpris and Orient Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orient Technologies and Cambridge Technology 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 Cambridge Technology Enterprises 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 Cambridge Technology i.e., Cambridge Technology and Orient Technologies go up and down completely randomly.

Pair Corralation between Cambridge Technology and Orient Technologies

Assuming the 90 days trading horizon Cambridge Technology Enterprises is expected to generate 0.89 times more return on investment than Orient Technologies. However, Cambridge Technology Enterprises is 1.12 times less risky than Orient Technologies. It trades about 0.35 of its potential returns per unit of risk. Orient Technologies Limited is currently generating about -0.06 per unit of risk. If you would invest  8,455  in Cambridge Technology Enterprises on September 16, 2024 and sell it today you would earn a total of  1,964  from holding Cambridge Technology Enterprises or generate 23.23% return on investment over 90 days.

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

Cambridge Technology Enterpris  vs.  Orient Technologies Limited

Cambridge Technology

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cambridge Technology Enterprises are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Cambridge Technology may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Orient Technologies

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Orient Technologies Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, Orient Technologies unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cambridge Technology and Orient Technologies

The main advantage of trading using opposite Cambridge Technology and Orient Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cambridge Technology 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 Cambridge Technology Enterprises 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.