Correlation Between Orca and REDLANG

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

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

Diversification Opportunities for Orca and REDLANG

0.03

Correlation Coefficient

Orca  REDLANG

Significant diversification

The 3 months correlation between Orca and REDLANG is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Orca and REDLANG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REDLANG and Orca 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 Orca are associated (or correlated) with REDLANG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REDLANG has no effect on the direction of Orca i.e., Orca and REDLANG go up and down completely randomly.

Pair Corralation between Orca and REDLANG

Assuming the 90 days trading horizon Orca is expected to under-perform the REDLANG. In addition to that, Orca is 1.2 times more volatile than REDLANG. It trades about -0.01 of its total potential returns per unit of risk. REDLANG is currently generating about 0.27 per unit of volatility. If you would invest  0.06  in REDLANG on May 5, 2025 and sell it today you would earn a total of  0.08  from holding REDLANG or generate 133.93% return on investment over 90 days.

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

Orca  vs.  REDLANG

Orca

Risk-Adjusted Performance

Very Weak

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

REDLANG

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in REDLANG are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady essential indicators, REDLANG reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Orca and REDLANG

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

The idea behind Orca and REDLANG 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..