Correlation Between Cummins and Ocean Power
Can any of the company-specific risk be diversified away by investing in both Cummins and Ocean 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 Cummins and Ocean Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cummins and Ocean Power Technologies, you can compare the effects of market volatilities on Cummins and Ocean 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 Cummins with a short position of Ocean Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cummins and Ocean Power.
Diversification Opportunities for Cummins and Ocean Power
-0.75 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Cummins and Ocean is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Cummins and Ocean Power Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ocean Power Technologies and Cummins 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 Cummins are associated (or correlated) with Ocean Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ocean Power Technologies has no effect on the direction of Cummins i.e., Cummins and Ocean Power go up and down completely randomly.
Pair Corralation between Cummins and Ocean Power
Considering the 90-day investment horizon Cummins is expected to generate 0.17 times more return on investment than Ocean Power. However, Cummins is 5.9 times less risky than Ocean Power. It trades about 0.14 of its potential returns per unit of risk. Ocean Power Technologies is currently generating about 0.01 per unit of risk. If you would invest 21,971 in Cummins on August 24, 2024 and sell it today you would earn a total of 14,877 from holding Cummins or generate 67.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cummins vs. Ocean Power Technologies
Performance |
| Timeline |
| Cummins |
| Ocean Power Technologies |
Cummins and Ocean Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cummins and Ocean Power
The main advantage of trading using opposite Cummins and Ocean Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cummins position performs unexpectedly, Ocean 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 Ocean Power will offset losses from the drop in Ocean Power's long position.The idea behind Cummins and Ocean Power Technologies 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.| Ocean Power vs. Pioneer Power Solutions | Ocean Power vs. CBAK Energy Technology | Ocean Power vs. Ideal Power | Ocean Power vs. Expion360 |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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