Correlation Between Synthetix and Orbs

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

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

Diversification Opportunities for Synthetix and Orbs

0.76

Correlation Coefficient

Synthetix  Orbs

Poor diversification

The 3 months correlation between Synthetix and Orbs is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Synthetix and Orbs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orbs and Synthetix 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 Synthetix are associated (or correlated) with Orbs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orbs has no effect on the direction of Synthetix i.e., Synthetix and Orbs go up and down completely randomly.

Pair Corralation between Synthetix and Orbs

Assuming the 90 days trading horizon Synthetix is expected to generate 1.08 times more return on investment than Orbs. However, Synthetix is 1.08 times more volatile than Orbs. It trades about 0.24 of its potential returns per unit of risk. Orbs is currently generating about 0.19 per unit of risk. If you would invest  128.00  in Synthetix on September 2, 2024 and sell it today you would earn a total of  135.00  from holding Synthetix or generate 105.47% return on investment over 90 days.

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

Synthetix  vs.  Orbs

Synthetix

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Synthetix are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Synthetix exhibited solid returns over the last few months and may actually be approaching a breakup point.

Orbs

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Orbs are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Orbs exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Synthetix and Orbs

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

The idea behind Synthetix and Orbs 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.