Correlation Between Ocumetics Technology and North American

Can any of the company-specific risk be diversified away by investing in both Ocumetics Technology and North American 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 Ocumetics Technology and North American into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ocumetics Technology Corp and North American Construction, you can compare the effects of market volatilities on Ocumetics Technology and North American 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 Ocumetics Technology with a short position of North American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ocumetics Technology and North American.

Diversification Opportunities for Ocumetics Technology and North American

-0.54

Correlation Coefficient

Ocumetics Technology  North American

Excellent diversification

The 3 months correlation between Ocumetics and North is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Ocumetics Technology Corp and North American Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North American Const and Ocumetics Technology 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 Ocumetics Technology Corp are associated (or correlated) with North American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North American Const has no effect on the direction of Ocumetics Technology i.e., Ocumetics Technology and North American go up and down completely randomly.

Pair Corralation between Ocumetics Technology and North American

Assuming the 90 days horizon Ocumetics Technology is expected to generate 17.76 times less return on investment than North American. In addition to that, Ocumetics Technology is 2.39 times more volatile than North American Construction. It trades about 0.0 of its total potential returns per unit of risk. North American Construction is currently generating about 0.16 per unit of volatility. If you would invest  2,413  in North American Construction on October 25, 2024 and sell it today you would earn a total of  594.00  from holding North American Construction or generate 24.62% return on investment over 90 days.

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

Ocumetics Technology Corp  vs.  North American Construction

Ocumetics Technology Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ocumetics Technology Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Ocumetics Technology is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

North American Const

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with Ocumetics Technology and North American

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

The idea behind Ocumetics Technology Corp and North American Construction 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.