Correlation Between Old Republic and Montauk Renewables

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

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

Diversification Opportunities for Old Republic and Montauk Renewables

-0.53

Correlation Coefficient

Old Republic  Montauk Renewables

Excellent diversification

The 3 months correlation between Old and Montauk is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Old Republic International and Montauk Renewables in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Montauk Renewables and Old Republic 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 Old Republic International are associated (or correlated) with Montauk Renewables. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Montauk Renewables has no effect on the direction of Old Republic i.e., Old Republic and Montauk Renewables go up and down completely randomly.

Pair Corralation between Old Republic and Montauk Renewables

Considering the 90-day investment horizon Old Republic International is expected to generate 0.28 times more return on investment than Montauk Renewables. However, Old Republic International is 3.51 times less risky than Montauk Renewables. It trades about 0.06 of its potential returns per unit of risk. Montauk Renewables is currently generating about -0.14 per unit of risk. If you would invest  3,539  in Old Republic International on September 13, 2024 and sell it today you would earn a total of  102.00  from holding Old Republic International or generate 2.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.67%
Values	Daily Returns

Old Republic International  vs.  Montauk Renewables

Old Republic Interna

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Old Republic International are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Old Republic is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Montauk Renewables

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Montauk Renewables has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Montauk Renewables is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Old Republic and Montauk Renewables

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

The idea behind Old Republic International and Montauk Renewables 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.

Check out your portfolio center.

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.