Correlation Between Orion Energy and Research Frontiers

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

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

Diversification Opportunities for Orion Energy and Research Frontiers

0.51

Correlation Coefficient

Orion Energy  Research Frontiers

Very weak diversification

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

Pair Corralation between Orion Energy and Research Frontiers

Given the investment horizon of 90 days Orion Energy Systems is expected to generate 1.22 times more return on investment than Research Frontiers. However, Orion Energy is 1.22 times more volatile than Research Frontiers Incorporated. It trades about -0.04 of its potential returns per unit of risk. Research Frontiers Incorporated is currently generating about -0.19 per unit of risk. If you would invest  86.00  in Orion Energy Systems on September 16, 2024 and sell it today you would lose (2.00) from holding Orion Energy Systems or give up 2.33% of portfolio value over 90 days.

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

Orion Energy Systems  vs.  Research Frontiers Incorporate

Orion Energy Systems

Risk-Adjusted Performance

0 of 100

Very Weak

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

Research Frontiers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Research Frontiers Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Research Frontiers is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Orion Energy and Research Frontiers

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

The idea behind Orion Energy Systems and Research Frontiers Incorporated 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.