Correlation Between Ortel Communications and Nestle India

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

Diversification Opportunities for Ortel Communications and Nestle India

-0.04

Correlation Coefficient

Ortel Communications  Nestle India

Good diversification

The 3 months correlation between Ortel and Nestle is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Ortel Communications Limited and Nestle India Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nestle India Limited 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 Nestle India. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nestle India Limited has no effect on the direction of Ortel Communications i.e., Ortel Communications and Nestle India go up and down completely randomly.

Pair Corralation between Ortel Communications and Nestle India

Assuming the 90 days trading horizon Ortel Communications Limited is expected to under-perform the Nestle India. In addition to that, Ortel Communications is 1.59 times more volatile than Nestle India Limited. It trades about -0.36 of its total potential returns per unit of risk. Nestle India Limited is currently generating about 0.14 per unit of volatility. If you would invest  215,810  in Nestle India Limited on October 22, 2024 and sell it today you would earn a total of  5,910  from holding Nestle India Limited or generate 2.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Ortel Communications Limited  vs.  Nestle India Limited

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 unfluctuating 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.

Nestle India Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nestle India Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, Nestle India is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Ortel Communications and Nestle India

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

The idea behind Ortel Communications Limited and Nestle India Limited 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.