Correlation Between Ontology and Maker

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

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

Diversification Opportunities for Ontology and Maker

0.64

Correlation Coefficient

Ontology  Maker

Poor diversification

The 3 months correlation between Ontology and Maker is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Ontology and Maker in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maker 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 Maker. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maker has no effect on the direction of Ontology i.e., Ontology and Maker go up and down completely randomly.

Pair Corralation between Ontology and Maker

Assuming the 90 days trading horizon Ontology is expected to generate 1.8 times more return on investment than Maker. However, Ontology is 1.8 times more volatile than Maker. It trades about 0.16 of its potential returns per unit of risk. Maker is currently generating about -0.06 per unit of risk. If you would invest  37.00  in Ontology on January 24, 2024 and sell it today you would earn a total of  11.00  from holding Ontology or generate 29.73% return on investment over 90 days.

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

Ontology  vs.  Maker

Ontology

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ontology are ranked lower than 14 (%) 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.

Maker

Risk-Adjusted Performance

8 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Maker are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Maker exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ontology and Maker

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

The idea behind Ontology and Maker 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.