Correlation Between Omega Flex and Donaldson

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

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

Diversification Opportunities for Omega Flex and Donaldson

0.77

Correlation Coefficient

Omega Flex  Donaldson

Poor diversification

The 3 months correlation between Omega and Donaldson is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Omega Flex and Donaldson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Donaldson and Omega Flex 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 Omega Flex are associated (or correlated) with Donaldson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Donaldson has no effect on the direction of Omega Flex i.e., Omega Flex and Donaldson go up and down completely randomly.

Pair Corralation between Omega Flex and Donaldson

Given the investment horizon of 90 days Omega Flex is expected to under-perform the Donaldson. In addition to that, Omega Flex is 1.48 times more volatile than Donaldson. It trades about -0.26 of its total potential returns per unit of risk. Donaldson is currently generating about -0.13 per unit of volatility. If you would invest  7,746  in Donaldson on November 28, 2024 and sell it today you would lose (795.00) from holding Donaldson or give up 10.26% of portfolio value over 90 days.

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

Omega Flex  vs.  Donaldson

Omega Flex

Risk-Adjusted Performance

Very Weak

Over the last 90 days Omega Flex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Donaldson

Risk-Adjusted Performance

Very Weak

Over the last 90 days Donaldson has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Omega Flex and Donaldson

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

The idea behind Omega Flex and Donaldson 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.