Correlation Between Oberweis International and Hodges Small
Can any of the company-specific risk be diversified away by investing in both Oberweis International and Hodges Small 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 Oberweis International and Hodges Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Oberweis International Opportunities and Hodges Small Cap, you can compare the effects of market volatilities on Oberweis International and Hodges Small 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 Oberweis International with a short position of Hodges Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oberweis International and Hodges Small.
Diversification Opportunities for Oberweis International and Hodges Small
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Oberweis and Hodges is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Oberweis International Opportu and Hodges Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hodges Small Cap and Oberweis International 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 Oberweis International Opportunities are associated (or correlated) with Hodges Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hodges Small Cap has no effect on the direction of Oberweis International i.e., Oberweis International and Hodges Small go up and down completely randomly.
Pair Corralation between Oberweis International and Hodges Small
Assuming the 90 days horizon Oberweis International is expected to generate 10.13 times less return on investment than Hodges Small. But when comparing it to its historical volatility, Oberweis International Opportunities is 1.87 times less risky than Hodges Small. It trades about 0.06 of its potential returns per unit of risk. Hodges Small Cap is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 2,356 in Hodges Small Cap on September 1, 2024 and sell it today you would earn a total of 261.00 from holding Hodges Small Cap or generate 11.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Oberweis International Opportu vs. Hodges Small Cap
Performance |
| Timeline |
| Oberweis International |
| Hodges Small Cap |
Oberweis International and Hodges Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Oberweis International and Hodges Small
The main advantage of trading using opposite Oberweis International and Hodges Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oberweis International position performs unexpectedly, Hodges Small 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 Hodges Small will offset losses from the drop in Hodges Small's long position.The idea behind Oberweis International Opportunities and Hodges Small Cap 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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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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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