Correlation Between Ortel Communications and Kavveri Telecom

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

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

Diversification Opportunities for Ortel Communications and Kavveri Telecom

0.23

Correlation Coefficient

Ortel Communications  Kavveri Telecom

Modest diversification

The 3 months correlation between Ortel and Kavveri is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Ortel Communications Limited and Kavveri Telecom Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kavveri Telecom Products and Ortel Communications 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 Ortel Communications Limited are associated (or correlated) with Kavveri Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kavveri Telecom Products has no effect on the direction of Ortel Communications i.e., Ortel Communications and Kavveri Telecom go up and down completely randomly.

Pair Corralation between Ortel Communications and Kavveri Telecom

Assuming the 90 days trading horizon Ortel Communications Limited is expected to generate 0.82 times more return on investment than Kavveri Telecom. However, Ortel Communications Limited is 1.22 times less risky than Kavveri Telecom. It trades about -0.05 of its potential returns per unit of risk. Kavveri Telecom Products is currently generating about -0.08 per unit of risk. If you would invest  199.00  in Ortel Communications Limited on January 13, 2025 and sell it today you would lose (21.00) from holding Ortel Communications Limited or give up 10.55% of portfolio value over 90 days.

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

Ortel Communications Limited  vs.  Kavveri Telecom Products

Ortel Communications

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ortel Communications Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Kavveri Telecom Products

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kavveri Telecom Products has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in May 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Ortel Communications and Kavveri Telecom

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

The idea behind Ortel Communications Limited and Kavveri Telecom Products 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.