Correlation Between Ortel Communications and Kingfa Science

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

Diversification Opportunities for Ortel Communications and Kingfa Science

0.52

Correlation Coefficient

Ortel Communications  Kingfa Science

Very weak diversification

The 3 months correlation between Ortel and Kingfa is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Ortel Communications Limited and Kingfa Science Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingfa Science Technology 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 Kingfa Science. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kingfa Science Technology has no effect on the direction of Ortel Communications i.e., Ortel Communications and Kingfa Science go up and down completely randomly.

Pair Corralation between Ortel Communications and Kingfa Science

Assuming the 90 days trading horizon Ortel Communications Limited is expected to generate 0.81 times more return on investment than Kingfa Science. However, Ortel Communications Limited is 1.24 times less risky than Kingfa Science. It trades about 0.12 of its potential returns per unit of risk. Kingfa Science Technology is currently generating about 0.08 per unit of risk. If you would invest  100.00  in Ortel Communications Limited on October 9, 2024 and sell it today you would earn a total of  100.00  from holding Ortel Communications Limited or generate 100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.18%
Values	Daily Returns

Ortel Communications Limited  vs.  Kingfa Science Technology

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.

Kingfa Science Technology

Risk-Adjusted Performance

8 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kingfa Science Technology are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal technical and fundamental indicators, Kingfa Science sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ortel Communications and Kingfa Science

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

The idea behind Ortel Communications Limited and Kingfa Science Technology 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.