Correlation Between OPC Energy and Lapidoth

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Can any of the company-specific risk be diversified away by investing in both OPC Energy and Lapidoth 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 OPC Energy and Lapidoth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between OPC Energy and Lapidoth, you can compare the effects of market volatilities on OPC Energy and Lapidoth 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 OPC Energy with a short position of Lapidoth. Check out your portfolio center. Please also check ongoing floating volatility patterns of OPC Energy and Lapidoth.

Diversification Opportunities for OPC Energy and Lapidoth

0.52
  Correlation Coefficient

Very weak diversification

The 3 months correlation between OPC and Lapidoth is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding OPC Energy and Lapidoth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lapidoth and OPC Energy 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 OPC Energy are associated (or correlated) with Lapidoth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lapidoth has no effect on the direction of OPC Energy i.e., OPC Energy and Lapidoth go up and down completely randomly.

Pair Corralation between OPC Energy and Lapidoth

Assuming the 90 days trading horizon OPC Energy is expected to generate 1.17 times less return on investment than Lapidoth. But when comparing it to its historical volatility, OPC Energy is 1.39 times less risky than Lapidoth. It trades about 0.23 of its potential returns per unit of risk. Lapidoth is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  575,100  in Lapidoth on December 29, 2023 and sell it today you would earn a total of  40,900  from holding Lapidoth or generate 7.11% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

OPC Energy  vs.  Lapidoth

 Performance 
       Timeline  
OPC Energy 

Risk-Adjusted Performance

3 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in OPC Energy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, OPC Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Lapidoth 

Risk-Adjusted Performance

3 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Lapidoth are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Lapidoth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

OPC Energy and Lapidoth Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with OPC Energy and Lapidoth

The main advantage of trading using opposite OPC Energy and Lapidoth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OPC Energy position performs unexpectedly, Lapidoth 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 Lapidoth will offset losses from the drop in Lapidoth's long position.
The idea behind OPC Energy and Lapidoth 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.

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