Correlation Between WESTLIFE FOODWORLD and Ortel Communications

Can any of the company-specific risk be diversified away by investing in both WESTLIFE FOODWORLD and Ortel Communications 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 WESTLIFE FOODWORLD and Ortel Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between WESTLIFE FOODWORLD LIMITED and Ortel Communications Limited, you can compare the effects of market volatilities on WESTLIFE FOODWORLD and Ortel Communications 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 WESTLIFE FOODWORLD with a short position of Ortel Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of WESTLIFE FOODWORLD and Ortel Communications.

Diversification Opportunities for WESTLIFE FOODWORLD and Ortel Communications

0.42

Correlation Coefficient

WESTLIFE FOODWORLD  Ortel Communications

Very weak diversification

The 3 months correlation between WESTLIFE and Ortel is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding WESTLIFE FOODWORLD LIMITED and Ortel Communications Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ortel Communications and WESTLIFE FOODWORLD 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 WESTLIFE FOODWORLD LIMITED are associated (or correlated) with Ortel Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ortel Communications has no effect on the direction of WESTLIFE FOODWORLD i.e., WESTLIFE FOODWORLD and Ortel Communications go up and down completely randomly.

Pair Corralation between WESTLIFE FOODWORLD and Ortel Communications

Assuming the 90 days trading horizon WESTLIFE FOODWORLD LIMITED is expected to generate 0.99 times more return on investment than Ortel Communications. However, WESTLIFE FOODWORLD LIMITED is 1.01 times less risky than Ortel Communications. It trades about 0.06 of its potential returns per unit of risk. Ortel Communications Limited is currently generating about -0.37 per unit of risk. If you would invest  80,845  in WESTLIFE FOODWORLD LIMITED on October 10, 2024 and sell it today you would earn a total of  1,500  from holding WESTLIFE FOODWORLD LIMITED or generate 1.86% return on investment over 90 days.

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

WESTLIFE FOODWORLD LIMITED  vs.  Ortel Communications Limited

WESTLIFE FOODWORLD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WESTLIFE FOODWORLD LIMITED has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's forward indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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 abnormal 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.

Pair Trading with WESTLIFE FOODWORLD and Ortel Communications

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

The idea behind WESTLIFE FOODWORLD LIMITED and Ortel Communications 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.