Correlation Between EM and Orca

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

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

Diversification Opportunities for EM and Orca

0.0

Correlation Coefficient

EM  Orca

Pay attention - limited upside

The 3 months correlation between EM and Orca is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding EM and Orca in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orca and EM 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 EM are associated (or correlated) with Orca. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orca has no effect on the direction of EM i.e., EM and Orca go up and down completely randomly.

Pair Corralation between EM and Orca

If you would invest  191.00  in Orca on February 16, 2025 and sell it today you would earn a total of  73.00  from holding Orca or generate 38.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

EM  vs.  Orca

EM

Risk-Adjusted Performance

Very Weak

Over the last 90 days EM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, EM is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Orca

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Orca are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Orca exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EM and Orca

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

The idea behind EM and Orca 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.