Correlation Between Omega Flex and Rockwell Automation

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

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

Diversification Opportunities for Omega Flex and Rockwell Automation

0.18

Correlation Coefficient

Omega Flex  Rockwell Automation

Average diversification

The 3 months correlation between Omega and Rockwell is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Omega Flex and Rockwell Automation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rockwell Automation and Omega Flex 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 Omega Flex are associated (or correlated) with Rockwell Automation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rockwell Automation has no effect on the direction of Omega Flex i.e., Omega Flex and Rockwell Automation go up and down completely randomly.

Pair Corralation between Omega Flex and Rockwell Automation

Given the investment horizon of 90 days Omega Flex is expected to under-perform the Rockwell Automation. But the stock apears to be less risky and, when comparing its historical volatility, Omega Flex is 1.06 times less risky than Rockwell Automation. The stock trades about -0.17 of its potential returns per unit of risk. The Rockwell Automation is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  27,633  in Rockwell Automation on February 4, 2024 and sell it today you would lose (228.00) from holding Rockwell Automation or give up 0.83% of portfolio value over 90 days.

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

Omega Flex  vs.  Rockwell Automation

Omega Flex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Omega Flex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, Omega Flex is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Rockwell Automation

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rockwell Automation are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Rockwell Automation is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Omega Flex and Rockwell Automation

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

The idea behind Omega Flex and Rockwell Automation 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.