Correlation Between Orbs and HT
Can any of the company-specific risk be diversified away by investing in both Orbs and HT 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 HT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Orbs and HT, you can compare the effects of market volatilities on Orbs and HT 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 HT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orbs and HT.
Diversification Opportunities for Orbs and HT
Excellent diversification
The 3 months correlation between Orbs and HT is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Orbs and HT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HT 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 HT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HT has no effect on the direction of Orbs i.e., Orbs and HT go up and down completely randomly.
Pair Corralation between Orbs and HT
Assuming the 90 days trading horizon Orbs is expected to generate 1.01 times more return on investment than HT. However, Orbs is 1.01 times more volatile than HT. It trades about -0.05 of its potential returns per unit of risk. HT is currently generating about -0.18 per unit of risk. If you would invest 4.05 in Orbs on January 19, 2024 and sell it today you would lose (0.48) from holding Orbs or give up 11.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Orbs vs. HT
Performance |
| Timeline |
| Orbs |
| HT |
Orbs and HT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Orbs and HT
The main advantage of trading using opposite Orbs and HT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orbs position performs unexpectedly, HT 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 HT will offset losses from the drop in HT's long position.The idea behind Orbs and HT 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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