Correlation Between Oriental Precision and Design

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

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

Diversification Opportunities for Oriental Precision and Design

-0.72

Correlation Coefficient

Oriental Precision  Design

Pay attention - limited upside

The 3 months correlation between Oriental and Design is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Oriental Precision Engineering and Design Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Design and Oriental Precision 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 Oriental Precision Engineering are associated (or correlated) with Design. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Design has no effect on the direction of Oriental Precision i.e., Oriental Precision and Design go up and down completely randomly.

Pair Corralation between Oriental Precision and Design

Assuming the 90 days trading horizon Oriental Precision Engineering is expected to generate 0.6 times more return on investment than Design. However, Oriental Precision Engineering is 1.67 times less risky than Design. It trades about 0.1 of its potential returns per unit of risk. Design Co is currently generating about -0.35 per unit of risk. If you would invest  498,385  in Oriental Precision Engineering on October 1, 2024 and sell it today you would earn a total of  35,615  from holding Oriental Precision Engineering or generate 7.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

Oriental Precision Engineering  vs.  Design Co

Oriental Precision

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Oriental Precision Engineering are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Oriental Precision sustained solid returns over the last few months and may actually be approaching a breakup point.

Design

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Design Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Oriental Precision and Design

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

The idea behind Oriental Precision Engineering and Design Co 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.