Correlation Between Ortel Communications and Industrial Investment

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

Diversification Opportunities for Ortel Communications and Industrial Investment

0.17

Correlation Coefficient

Ortel Communications  Industrial Investment

Average diversification

The 3 months correlation between Ortel and Industrial is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Ortel Communications Limited and Industrial Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial Investment 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 Industrial Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial Investment has no effect on the direction of Ortel Communications i.e., Ortel Communications and Industrial Investment go up and down completely randomly.

Pair Corralation between Ortel Communications and Industrial Investment

Assuming the 90 days trading horizon Ortel Communications is expected to generate 2.5 times less return on investment than Industrial Investment. In addition to that, Ortel Communications is 1.01 times more volatile than Industrial Investment Trust. It trades about 0.1 of its total potential returns per unit of risk. Industrial Investment Trust is currently generating about 0.25 per unit of volatility. If you would invest  17,273  in Industrial Investment Trust on September 25, 2024 and sell it today you would earn a total of  20,852  from holding Industrial Investment Trust or generate 120.72% return on investment over 90 days.

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

Ortel Communications Limited  vs.  Industrial Investment Trust

Ortel Communications

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ortel Communications Limited are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Ortel Communications displayed solid returns over the last few months and may actually be approaching a breakup point.

Industrial Investment

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial Investment Trust are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Industrial Investment unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ortel Communications and Industrial Investment

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

The idea behind Ortel Communications Limited and Industrial Investment Trust 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.