Correlation Between Orbit Technologies and Sofwave Medical

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

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

Diversification Opportunities for Orbit Technologies and Sofwave Medical

0.22

Correlation Coefficient

Orbit Technologies  Sofwave Medical

Modest diversification

The 3 months correlation between Orbit and Sofwave is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Orbit Technologies and Sofwave Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sofwave Medical and Orbit 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 Orbit Technologies are associated (or correlated) with Sofwave Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sofwave Medical has no effect on the direction of Orbit Technologies i.e., Orbit Technologies and Sofwave Medical go up and down completely randomly.

Pair Corralation between Orbit Technologies and Sofwave Medical

Assuming the 90 days trading horizon Orbit Technologies is expected to generate 0.61 times more return on investment than Sofwave Medical. However, Orbit Technologies is 1.63 times less risky than Sofwave Medical. It trades about 0.1 of its potential returns per unit of risk. Sofwave Medical is currently generating about 0.04 per unit of risk. If you would invest  291,000  in Orbit Technologies on December 30, 2024 and sell it today you would earn a total of  32,000  from holding Orbit Technologies or generate 11.0% return on investment over 90 days.

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

Orbit Technologies  vs.  Sofwave Medical

Orbit Technologies

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Orbit Technologies are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Orbit Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.

Sofwave Medical

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sofwave Medical are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sofwave Medical may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Orbit Technologies and Sofwave Medical

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

The idea behind Orbit Technologies and Sofwave Medical 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.