Correlation Between Ortel Communications and Consolidated Construction

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

By analyzing existing cross correlation between Ortel Communications Limited and Consolidated Construction Consortium, you can compare the effects of market volatilities on Ortel Communications and Consolidated Construction 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 Ortel Communications with a short position of Consolidated Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ortel Communications and Consolidated Construction.

Diversification Opportunities for Ortel Communications and Consolidated Construction

0.07

Correlation Coefficient

Ortel Communications  Consolidated Construction

Significant diversification

The 3 months correlation between Ortel and Consolidated is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Ortel Communications Limited and Consolidated Construction Cons in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consolidated Construction and Ortel Communications 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 Ortel Communications Limited are associated (or correlated) with Consolidated Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consolidated Construction has no effect on the direction of Ortel Communications i.e., Ortel Communications and Consolidated Construction go up and down completely randomly.

Pair Corralation between Ortel Communications and Consolidated Construction

Assuming the 90 days trading horizon Ortel Communications is expected to generate 8.31 times less return on investment than Consolidated Construction. But when comparing it to its historical volatility, Ortel Communications Limited is 9.91 times less risky than Consolidated Construction. It trades about 0.06 of its potential returns per unit of risk. Consolidated Construction Consortium is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  150.00  in Consolidated Construction Consortium on October 24, 2024 and sell it today you would earn a total of  1,659  from holding Consolidated Construction Consortium or generate 1106.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

Ortel Communications Limited  vs.  Consolidated Construction Cons

Ortel Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ortel Communications Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Consolidated Construction

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Ortel Communications and Consolidated Construction

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

The idea behind Ortel Communications Limited and Consolidated Construction Consortium 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.