Correlation Between Orsted AS and RTX AS

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

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

Diversification Opportunities for Orsted AS and RTX AS

-0.14

Correlation Coefficient

Orsted AS  RTX AS

Good diversification

The 3 months correlation between Orsted and RTX is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Orsted AS and RTX AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RTX AS and Orsted AS 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 Orsted AS are associated (or correlated) with RTX AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RTX AS has no effect on the direction of Orsted AS i.e., Orsted AS and RTX AS go up and down completely randomly.

Pair Corralation between Orsted AS and RTX AS

Assuming the 90 days trading horizon Orsted AS is expected to under-perform the RTX AS. In addition to that, Orsted AS is 1.04 times more volatile than RTX AS. It trades about -0.01 of its total potential returns per unit of risk. RTX AS is currently generating about 0.14 per unit of volatility. If you would invest  5,640  in RTX AS on December 29, 2024 and sell it today you would earn a total of  1,360  from holding RTX AS or generate 24.11% return on investment over 90 days.

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

Orsted AS  vs.  RTX AS

Orsted AS

Risk-Adjusted Performance

Very Weak

Over the last 90 days Orsted AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Orsted AS is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

RTX AS

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RTX AS are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, RTX AS displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Orsted AS and RTX AS

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

The idea behind Orsted AS and RTX AS 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.