Correlation Between Orbs and CEL
Can any of the company-specific risk be diversified away by investing in both Orbs and CEL 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 Orbs and CEL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Orbs and CEL, you can compare the effects of market volatilities on Orbs and CEL 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 Orbs with a short position of CEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orbs and CEL.
Diversification Opportunities for Orbs and CEL
Poor diversification
The 3 months correlation between Orbs and CEL is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Orbs and CEL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CEL and Orbs 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 Orbs are associated (or correlated) with CEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CEL has no effect on the direction of Orbs i.e., Orbs and CEL go up and down completely randomly.
Pair Corralation between Orbs and CEL
Assuming the 90 days trading horizon Orbs is expected to generate 6.41 times less return on investment than CEL. But when comparing it to its historical volatility, Orbs is 2.3 times less risky than CEL. It trades about 0.01 of its potential returns per unit of risk. CEL is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 201.00 in CEL on January 19, 2024 and sell it today you would lose (186.00) from holding CEL or give up 92.54% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Orbs vs. CEL
Performance |
| Timeline |
| Orbs |
| CEL |
Orbs and CEL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Orbs and CEL
The main advantage of trading using opposite Orbs and CEL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orbs position performs unexpectedly, CEL 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 CEL will offset losses from the drop in CEL's long position.The idea behind Orbs and CEL 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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