Correlation Between Orient Technologies and Servotech Power

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

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

Diversification Opportunities for Orient Technologies and Servotech Power

0.03

Correlation Coefficient

Orient Technologies  Servotech Power

Significant diversification

The 3 months correlation between Orient and Servotech is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Orient Technologies Limited and Servotech Power Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Servotech Power Systems and Orient Technologies 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 Orient Technologies Limited are associated (or correlated) with Servotech Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Servotech Power Systems has no effect on the direction of Orient Technologies i.e., Orient Technologies and Servotech Power go up and down completely randomly.

Pair Corralation between Orient Technologies and Servotech Power

Assuming the 90 days trading horizon Orient Technologies Limited is expected to generate 1.18 times more return on investment than Servotech Power. However, Orient Technologies is 1.18 times more volatile than Servotech Power Systems. It trades about 0.11 of its potential returns per unit of risk. Servotech Power Systems is currently generating about 0.12 per unit of risk. If you would invest  31,671  in Orient Technologies Limited on September 2, 2024 and sell it today you would earn a total of  8,174  from holding Orient Technologies Limited or generate 25.81% return on investment over 90 days.

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

Orient Technologies Limited  vs.  Servotech Power Systems

Orient Technologies

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Orient Technologies Limited are ranked lower than 8 (%) 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.

Servotech Power Systems

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Servotech Power Systems are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Servotech Power exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Orient Technologies and Servotech Power

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

The idea behind Orient Technologies Limited and Servotech Power Systems 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.