Correlation Between Orbit Technologies and GODM Investments

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

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

Diversification Opportunities for Orbit Technologies and GODM Investments

-0.51

Correlation Coefficient

Orbit Technologies  GODM Investments

Excellent diversification

The 3 months correlation between Orbit and GODM is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Orbit Technologies and GODM Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GODM Investments and Orbit Technologies 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 Orbit Technologies are associated (or correlated) with GODM Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GODM Investments has no effect on the direction of Orbit Technologies i.e., Orbit Technologies and GODM Investments go up and down completely randomly.

Pair Corralation between Orbit Technologies and GODM Investments

Assuming the 90 days trading horizon Orbit Technologies is expected to generate 0.47 times more return on investment than GODM Investments. However, Orbit Technologies is 2.13 times less risky than GODM Investments. It trades about 0.06 of its potential returns per unit of risk. GODM Investments is currently generating about -0.01 per unit of risk. If you would invest  190,600  in Orbit Technologies on July 6, 2024 and sell it today you would earn a total of  47,600  from holding Orbit Technologies or generate 24.97% return on investment over 90 days.

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

Orbit Technologies  vs.  GODM Investments

Orbit Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Orbit Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Orbit Technologies is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

GODM Investments

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GODM Investments are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, GODM Investments may actually be approaching a critical reversion point that can send shares even higher in November 2024.

Pair Trading with Orbit Technologies and GODM Investments

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

The idea behind Orbit Technologies and GODM Investments 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.