Correlation Between Ontology and EM

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

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

Diversification Opportunities for Ontology and EM

0.71

Correlation Coefficient

Ontology  EM

Poor diversification

The 3 months correlation between Ontology and EM is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Ontology and EM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EM 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 EM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EM has no effect on the direction of Ontology i.e., Ontology and EM go up and down completely randomly.

Pair Corralation between Ontology and EM

Assuming the 90 days trading horizon Ontology is expected to generate 1.55 times more return on investment than EM. However, Ontology is 1.55 times more volatile than EM. It trades about 0.09 of its potential returns per unit of risk. EM is currently generating about 0.0 per unit of risk. If you would invest  19.00  in Ontology on January 19, 2024 and sell it today you would earn a total of  10.00  from holding Ontology or generate 52.63% return on investment over 90 days.

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

Ontology  vs.  EM

Ontology

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ontology are ranked lower than 6 (%) 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.

EM

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in EM are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, EM may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Ontology and EM

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

The idea behind Ontology and EM 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.