Correlation Between Chardan NexTech and Ocean Power

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

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

Diversification Opportunities for Chardan NexTech and Ocean Power

0.31

Correlation Coefficient

Chardan NexTech  Ocean Power

Weak diversification

The 3 months correlation between Chardan and Ocean is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Chardan NexTech Acquisition and Ocean Power Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ocean Power Technologies and Chardan NexTech 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 Chardan NexTech Acquisition are associated (or correlated) with Ocean Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ocean Power Technologies has no effect on the direction of Chardan NexTech i.e., Chardan NexTech and Ocean Power go up and down completely randomly.

Pair Corralation between Chardan NexTech and Ocean Power

Given the investment horizon of 90 days Chardan NexTech Acquisition is expected to under-perform the Ocean Power. But the stock apears to be less risky and, when comparing its historical volatility, Chardan NexTech Acquisition is 2.38 times less risky than Ocean Power. The stock trades about -0.18 of its potential returns per unit of risk. The Ocean Power Technologies is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  34.00  in Ocean Power Technologies on December 20, 2024 and sell it today you would earn a total of  13.36  from holding Ocean Power Technologies or generate 39.29% return on investment over 90 days.

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

Chardan NexTech Acquisition  vs.  Ocean Power Technologies

Chardan NexTech Acqu

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chardan NexTech Acquisition 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 essential indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Ocean Power Technologies

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ocean Power Technologies are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Ocean Power unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chardan NexTech and Ocean Power

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

The idea behind Chardan NexTech Acquisition and Ocean Power Technologies 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.