Correlation Between Odyssey Energy and Ecofibre

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

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

Diversification Opportunities for Odyssey Energy and Ecofibre

0.09

Correlation Coefficient

Odyssey Energy  Ecofibre

Significant diversification

The 3 months correlation between Odyssey and Ecofibre is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Odyssey Energy and Ecofibre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecofibre and Odyssey Energy 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 Odyssey Energy are associated (or correlated) with Ecofibre. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecofibre has no effect on the direction of Odyssey Energy i.e., Odyssey Energy and Ecofibre go up and down completely randomly.

Pair Corralation between Odyssey Energy and Ecofibre

Assuming the 90 days trading horizon Odyssey Energy is expected to generate 7.48 times less return on investment than Ecofibre. But when comparing it to its historical volatility, Odyssey Energy is 1.38 times less risky than Ecofibre. It trades about 0.03 of its potential returns per unit of risk. Ecofibre is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2.10  in Ecofibre on August 31, 2024 and sell it today you would earn a total of  1.90  from holding Ecofibre or generate 90.48% return on investment over 90 days.

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

Odyssey Energy  vs.  Ecofibre

Odyssey Energy

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Odyssey Energy are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Odyssey Energy may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Ecofibre

Risk-Adjusted Performance

12 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ecofibre are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Ecofibre unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Odyssey Energy and Ecofibre

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

The idea behind Odyssey Energy and Ecofibre 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.

Check out your portfolio center.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.