Correlation Between Ortel Communications and EIH Associated

Can any of the company-specific risk be diversified away by investing in both Ortel Communications and EIH Associated 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 EIH Associated 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 EIH Associated Hotels, you can compare the effects of market volatilities on Ortel Communications and EIH Associated 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 EIH Associated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ortel Communications and EIH Associated.

Diversification Opportunities for Ortel Communications and EIH Associated

0.34

Correlation Coefficient

Ortel Communications  EIH Associated

Weak diversification

The 3 months correlation between Ortel and EIH is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Ortel Communications Limited and EIH Associated Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EIH Associated Hotels 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 EIH Associated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EIH Associated Hotels has no effect on the direction of Ortel Communications i.e., Ortel Communications and EIH Associated go up and down completely randomly.

Pair Corralation between Ortel Communications and EIH Associated

Assuming the 90 days trading horizon Ortel Communications Limited is expected to under-perform the EIH Associated. But the stock apears to be less risky and, when comparing its historical volatility, Ortel Communications Limited is 1.62 times less risky than EIH Associated. The stock trades about -0.31 of its potential returns per unit of risk. The EIH Associated Hotels is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  41,090  in EIH Associated Hotels on October 8, 2024 and sell it today you would earn a total of  2,780  from holding EIH Associated Hotels or generate 6.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

Ortel Communications Limited  vs.  EIH Associated Hotels

Ortel Communications

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ortel Communications Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Ortel Communications is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

EIH Associated Hotels

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EIH Associated Hotels are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, EIH Associated unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ortel Communications and EIH Associated

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

The idea behind Ortel Communications Limited and EIH Associated Hotels 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.