Correlation Between Orbit International and Nortech Systems

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

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

Diversification Opportunities for Orbit International and Nortech Systems

-0.04

Correlation Coefficient

Orbit International  Nortech Systems

Good diversification

The 3 months correlation between Orbit and Nortech is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Orbit International and Nortech Systems Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nortech Systems and Orbit International 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 International are associated (or correlated) with Nortech Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nortech Systems has no effect on the direction of Orbit International i.e., Orbit International and Nortech Systems go up and down completely randomly.

Pair Corralation between Orbit International and Nortech Systems

If you would invest  975.00  in Nortech Systems Incorporated on September 15, 2024 and sell it today you would earn a total of  175.00  from holding Nortech Systems Incorporated or generate 17.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	0.4%
Values	Daily Returns

Orbit International  vs.  Nortech Systems Incorporated

Orbit International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Orbit International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, Orbit International is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Nortech Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nortech Systems Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Nortech Systems is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Orbit International and Nortech Systems

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

The idea behind Orbit International and Nortech Systems Incorporated 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.