Correlation Between Omni Small-cap and Financial Services
Can any of the company-specific risk be diversified away by investing in both Omni Small-cap and Financial Services 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-cap and Financial Services 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 Financial Services Portfolio, you can compare the effects of market volatilities on Omni Small-cap and Financial Services 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-cap with a short position of Financial Services. Check out your portfolio center. Please also check ongoing floating volatility patterns of Omni Small-cap and Financial Services.
Diversification Opportunities for Omni Small-cap and Financial Services
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Omni and Financial is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Omni Small Cap Value and Financial Services Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Services and Omni Small-cap 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 Financial Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial Services has no effect on the direction of Omni Small-cap i.e., Omni Small-cap and Financial Services go up and down completely randomly.
Pair Corralation between Omni Small-cap and Financial Services
Assuming the 90 days horizon Omni Small-cap is expected to generate 2.09 times less return on investment than Financial Services. In addition to that, Omni Small-cap is 1.57 times more volatile than Financial Services Portfolio. It trades about 0.02 of its total potential returns per unit of risk. Financial Services Portfolio is currently generating about 0.07 per unit of volatility. If you would invest 930.00 in Financial Services Portfolio on September 4, 2024 and sell it today you would earn a total of 372.00 from holding Financial Services Portfolio or generate 40.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Omni Small Cap Value vs. Financial Services Portfolio
Performance |
| Timeline |
| Omni Small Cap |
| Financial Services |
Omni Small-cap and Financial Services Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Omni Small-cap and Financial Services
The main advantage of trading using opposite Omni Small-cap and Financial Services positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Omni Small-cap position performs unexpectedly, Financial Services 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 Financial Services will offset losses from the drop in Financial Services' long position.| Omni Small-cap vs. Morningstar Global Income | Omni Small-cap vs. Franklin Mutual Global | Omni Small-cap vs. Ab Global Risk | Omni Small-cap vs. Scharf Global Opportunity |
| Financial Services vs. Small Cap Stock | Financial Services vs. Commonwealth Global Fund | Financial Services vs. Omni Small Cap Value | Financial Services vs. Eic Value Fund |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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