Correlation Between Ontology and OLT

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

By analyzing existing cross correlation between Ontology and OLT, you can compare the effects of market volatilities on Ontology and OLT 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 OLT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ontology and OLT.

Diversification Opportunities for Ontology and OLT

-0.11

Correlation Coefficient

Ontology  OLT

Good diversification

The 3 months correlation between Ontology and OLT is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Ontology and OLT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OLT 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 OLT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OLT has no effect on the direction of Ontology i.e., Ontology and OLT go up and down completely randomly.

Pair Corralation between Ontology and OLT

Assuming the 90 days trading horizon Ontology is expected to generate 0.96 times more return on investment than OLT. However, Ontology is 1.04 times less risky than OLT. It trades about 0.04 of its potential returns per unit of risk. OLT is currently generating about -0.02 per unit of risk. If you would invest  38.00  in Ontology on January 28, 2024 and sell it today you would lose (1.00) from holding Ontology or give up 2.63% of portfolio value over 90 days.

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

Ontology  vs.  OLT

Ontology

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ontology are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Ontology exhibited solid returns over the last few months and may actually be approaching a breakup point.

OLT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days OLT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, OLT is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ontology and OLT

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

The idea behind Ontology and OLT 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.