Correlation Between Ontology and Compania

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

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

Diversification Opportunities for Ontology and Compania

0.7

Correlation Coefficient

Ontology  Compania

Poor diversification

The 3 months correlation between Ontology and Compania is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Ontology and Compania de Minas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compania de Minas 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 Compania. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compania de Minas has no effect on the direction of Ontology i.e., Ontology and Compania go up and down completely randomly.

Pair Corralation between Ontology and Compania

Assuming the 90 days trading horizon Ontology is expected to generate 3.86 times more return on investment than Compania. However, Ontology is 3.86 times more volatile than Compania de Minas. It trades about 0.11 of its potential returns per unit of risk. Compania de Minas is currently generating about 0.05 per unit of risk. If you would invest  25.00  in Ontology on January 17, 2024 and sell it today you would earn a total of  6.00  from holding Ontology or generate 24.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.35%
Values	Daily Returns

Ontology  vs.  Compania de Minas

Ontology

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ontology are ranked lower than 8 (%) 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.

Compania de Minas

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Compania de Minas are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Compania may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Ontology and Compania

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

The idea behind Ontology and Compania de Minas 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.