Correlation Between Ortel Communications and Mangalore Chemicals

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

Diversification Opportunities for Ortel Communications and Mangalore Chemicals

0.24

Correlation Coefficient

Ortel Communications  Mangalore Chemicals

Modest diversification

The 3 months correlation between Ortel and Mangalore is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Ortel Communications Limited and Mangalore Chemicals Fertilizer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mangalore Chemicals 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 Mangalore Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mangalore Chemicals has no effect on the direction of Ortel Communications i.e., Ortel Communications and Mangalore Chemicals go up and down completely randomly.

Pair Corralation between Ortel Communications and Mangalore Chemicals

Assuming the 90 days trading horizon Ortel Communications Limited is expected to generate 1.2 times more return on investment than Mangalore Chemicals. However, Ortel Communications is 1.2 times more volatile than Mangalore Chemicals Fertilizers. It trades about 0.07 of its potential returns per unit of risk. Mangalore Chemicals Fertilizers is currently generating about 0.06 per unit of risk. If you would invest  105.00  in Ortel Communications Limited on October 5, 2024 and sell it today you would earn a total of  106.00  from holding Ortel Communications Limited or generate 100.95% return on investment over 90 days.

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

Ortel Communications Limited  vs.  Mangalore Chemicals Fertilizer

Ortel Communications

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ortel Communications Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Ortel Communications may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Mangalore Chemicals

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mangalore Chemicals Fertilizers are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Mangalore Chemicals exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ortel Communications and Mangalore Chemicals

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

The idea behind Ortel Communications Limited and Mangalore Chemicals Fertilizers 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.

Check out your portfolio center.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.