Correlation Between Omni Small and American Funds
Can any of the company-specific risk be diversified away by investing in both Omni Small and American Funds 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 Omni Small and American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Omni Small Cap Value and American Funds 2055, you can compare the effects of market volatilities on Omni Small and American Funds 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 Omni Small with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Omni Small and American Funds.
Diversification Opportunities for Omni Small and American Funds
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Omni and American is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Omni Small Cap Value and American Funds 2055 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds 2055 and Omni Small 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 Omni Small Cap Value are associated (or correlated) with American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds 2055 has no effect on the direction of Omni Small i.e., Omni Small and American Funds go up and down completely randomly.
Pair Corralation between Omni Small and American Funds
Assuming the 90 days horizon Omni Small Cap Value is expected to under-perform the American Funds. In addition to that, Omni Small is 1.72 times more volatile than American Funds 2055. It trades about -0.06 of its total potential returns per unit of risk. American Funds 2055 is currently generating about -0.01 per unit of volatility. If you would invest 2,699 in American Funds 2055 on September 12, 2024 and sell it today you would lose (3.00) from holding American Funds 2055 or give up 0.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Omni Small Cap Value vs. American Funds 2055
Performance |
| Timeline |
| Omni Small Cap |
| American Funds 2055 |
Omni Small and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Omni Small and American Funds
The main advantage of trading using opposite Omni Small and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Omni Small position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' long position.| Omni Small vs. Davenport Small Cap | Omni Small vs. Lord Abbett Diversified | Omni Small vs. Jhancock Diversified Macro | Omni Small vs. Pioneer Diversified High |
| American Funds vs. Ab Bond Inflation | American Funds vs. Aqr Managed Futures | American Funds vs. Atac Inflation Rotation | American Funds vs. Goldman Sachs Inflation |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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