Correlation Between Omega Flex and Dover

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

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

Diversification Opportunities for Omega Flex and Dover

0.02

Correlation Coefficient

Omega Flex  Dover

Significant diversification

The 3 months correlation between Omega and Dover is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Omega Flex and Dover in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dover and Omega Flex 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 Omega Flex are associated (or correlated) with Dover. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dover has no effect on the direction of Omega Flex i.e., Omega Flex and Dover go up and down completely randomly.

Pair Corralation between Omega Flex and Dover

Given the investment horizon of 90 days Omega Flex is expected to under-perform the Dover. In addition to that, Omega Flex is 2.3 times more volatile than Dover. It trades about -0.39 of its total potential returns per unit of risk. Dover is currently generating about -0.01 per unit of volatility. If you would invest  20,003  in Dover on September 17, 2024 and sell it today you would lose (28.00) from holding Dover or give up 0.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Omega Flex  vs.  Dover

Omega Flex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Omega Flex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Dover

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dover are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Dover may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Omega Flex and Dover

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

The idea behind Omega Flex and Dover 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.