Correlation Between Omega Flex and Standex International

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

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

Diversification Opportunities for Omega Flex and Standex International

0.66

Correlation Coefficient

Omega Flex  Standex International

Poor diversification

The 3 months correlation between Omega and Standex is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Omega Flex and Standex International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Standex International 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 Standex International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Standex International has no effect on the direction of Omega Flex i.e., Omega Flex and Standex International go up and down completely randomly.

Pair Corralation between Omega Flex and Standex International

Given the investment horizon of 90 days Omega Flex is expected to generate 1.82 times less return on investment than Standex International. But when comparing it to its historical volatility, Omega Flex is 1.05 times less risky than Standex International. It trades about 0.09 of its potential returns per unit of risk. Standex International is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  17,057  in Standex International on August 31, 2024 and sell it today you would earn a total of  3,699  from holding Standex International or generate 21.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Omega Flex  vs.  Standex International

Omega Flex

Risk-Adjusted Performance

7 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Omega Flex are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating essential indicators, Omega Flex may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Standex International

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with Omega Flex and Standex International

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

The idea behind Omega Flex and Standex International 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.