Correlation Between Orbs and HEDG
Can any of the company-specific risk be diversified away by investing in both Orbs and HEDG 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 HEDG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Orbs and HEDG, you can compare the effects of market volatilities on Orbs and HEDG 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 HEDG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orbs and HEDG.
Diversification Opportunities for Orbs and HEDG
Good diversification
The 12 months correlation between Orbs and HEDG is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Orbs and HEDG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEDG 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 HEDG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEDG has no effect on the direction of Orbs i.e., Orbs and HEDG go up and down completely randomly.
Pair Corralation between Orbs and HEDG
Assuming the 90 days trading horizon Orbs is expected to generate 34.08 times less return on investment than HEDG. But when comparing it to its historical volatility, Orbs is 4.66 times less risky than HEDG. It trades about 0.01 of its potential returns per unit of risk. HEDG is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 21.00 in HEDG on January 20, 2024 and sell it today you would lose (17.38) from holding HEDG or give up 82.76% of portfolio value over 90 days.
| Time Period | 12 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Orbs vs. HEDG
Performance |
| Timeline |
| Orbs |
| HEDG |
Orbs and HEDG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Orbs and HEDG
The main advantage of trading using opposite Orbs and HEDG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orbs position performs unexpectedly, HEDG 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 HEDG will offset losses from the drop in HEDG's long position.The idea behind Orbs and HEDG 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. |