Correlation Between Ocean Power and ENGlobal
Can any of the company-specific risk be diversified away by investing in both Ocean Power and ENGlobal 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 Ocean Power and ENGlobal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ocean Power Technologies and ENGlobal, you can compare the effects of market volatilities on Ocean Power and ENGlobal 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 Ocean Power with a short position of ENGlobal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ocean Power and ENGlobal.
Diversification Opportunities for Ocean Power and ENGlobal
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Ocean and ENGlobal is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Ocean Power Technologies and ENGlobal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENGlobal and Ocean Power 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 Ocean Power Technologies are associated (or correlated) with ENGlobal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENGlobal has no effect on the direction of Ocean Power i.e., Ocean Power and ENGlobal go up and down completely randomly.
Pair Corralation between Ocean Power and ENGlobal
Given the investment horizon of 90 days Ocean Power Technologies is expected to generate 0.9 times more return on investment than ENGlobal. However, Ocean Power Technologies is 1.11 times less risky than ENGlobal. It trades about 0.22 of its potential returns per unit of risk. ENGlobal is currently generating about -0.04 per unit of risk. If you would invest 15.00 in Ocean Power Technologies on August 28, 2024 and sell it today you would earn a total of 3.00 from holding Ocean Power Technologies or generate 20.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ocean Power Technologies vs. ENGlobal
Performance |
| Timeline |
| Ocean Power Technologies |
| ENGlobal |
Ocean Power and ENGlobal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ocean Power and ENGlobal
The main advantage of trading using opposite Ocean Power and ENGlobal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ocean Power position performs unexpectedly, ENGlobal 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 ENGlobal will offset losses from the drop in ENGlobal's long position.| 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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