Correlation Between Associated Alcohols and Orient Technologies

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

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

Diversification Opportunities for Associated Alcohols and Orient Technologies

0.46

Correlation Coefficient

Associated Alcohols  Orient Technologies

Very weak diversification

The 3 months correlation between Associated and Orient is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Associated Alcohols Breweries and Orient Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orient Technologies and Associated Alcohols 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 Associated Alcohols Breweries are associated (or correlated) with Orient Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orient Technologies has no effect on the direction of Associated Alcohols i.e., Associated Alcohols and Orient Technologies go up and down completely randomly.

Pair Corralation between Associated Alcohols and Orient Technologies

Assuming the 90 days trading horizon Associated Alcohols is expected to generate 3.1 times less return on investment than Orient Technologies. But when comparing it to its historical volatility, Associated Alcohols Breweries is 1.66 times less risky than Orient Technologies. It trades about 0.09 of its potential returns per unit of risk. Orient Technologies Limited is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  30,232  in Orient Technologies Limited on September 20, 2024 and sell it today you would earn a total of  15,323  from holding Orient Technologies Limited or generate 50.68% return on investment over 90 days.

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

Associated Alcohols Breweries  vs.  Orient Technologies Limited

Associated Alcohols

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Associated Alcohols Breweries are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting fundamental indicators, Associated Alcohols reported solid returns over the last few months and may actually be approaching a breakup point.

Orient Technologies

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Orient Technologies Limited are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, Orient Technologies unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Associated Alcohols and Orient Technologies

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

The idea behind Associated Alcohols Breweries and Orient Technologies Limited 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.