Correlation Between Ontology and CHP
Can any of the company-specific risk be diversified away by investing in both Ontology and CHP 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 Ontology and CHP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ontology and CHP, you can compare the effects of market volatilities on Ontology and CHP 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 Ontology with a short position of CHP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ontology and CHP.
Diversification Opportunities for Ontology and CHP
Very good diversification
The 3 months correlation between Ontology and CHP is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Ontology and CHP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHP and Ontology 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 Ontology are associated (or correlated) with CHP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHP has no effect on the direction of Ontology i.e., Ontology and CHP go up and down completely randomly.
Pair Corralation between Ontology and CHP
Assuming the 90 days trading horizon Ontology is expected to generate 1.21 times more return on investment than CHP. However, Ontology is 1.21 times more volatile than CHP. It trades about 0.32 of its potential returns per unit of risk. CHP is currently generating about 0.38 per unit of risk. If you would invest 17.00 in Ontology on August 25, 2024 and sell it today you would earn a total of 7.00 from holding Ontology or generate 41.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ontology vs. CHP
Performance |
| Timeline |
| Ontology |
| CHP |
Ontology and CHP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ontology and CHP
The main advantage of trading using opposite Ontology and CHP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ontology position performs unexpectedly, CHP 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 CHP will offset losses from the drop in CHP's long position.The idea behind Ontology and CHP 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.
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