Correlation Between Oberweis International and Oberweis Micro-cap
Can any of the company-specific risk be diversified away by investing in both Oberweis International and Oberweis Micro-cap 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 Oberweis Micro-cap 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 Oberweis Micro Cap Fund, you can compare the effects of market volatilities on Oberweis International and Oberweis Micro-cap 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 Oberweis Micro-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oberweis International and Oberweis Micro-cap.
Diversification Opportunities for Oberweis International and Oberweis Micro-cap
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Oberweis and Oberweis is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Oberweis International Opportu and Oberweis Micro Cap Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oberweis Micro 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 Oberweis Micro-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oberweis Micro Cap has no effect on the direction of Oberweis International i.e., Oberweis International and Oberweis Micro-cap go up and down completely randomly.
Pair Corralation between Oberweis International and Oberweis Micro-cap
Assuming the 90 days horizon Oberweis International is expected to generate 2.84 times less return on investment than Oberweis Micro-cap. But when comparing it to its historical volatility, Oberweis International Opportunities is 1.56 times less risky than Oberweis Micro-cap. It trades about 0.03 of its potential returns per unit of risk. Oberweis Micro Cap Fund is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 3,477 in Oberweis Micro Cap Fund on November 1, 2024 and sell it today you would earn a total of 1,095 from holding Oberweis Micro Cap Fund or generate 31.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Oberweis International Opportu vs. Oberweis Micro Cap Fund
Performance |
| Timeline |
| Oberweis International |
| Oberweis Micro Cap |
Oberweis International and Oberweis Micro-cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Oberweis International and Oberweis Micro-cap
The main advantage of trading using opposite Oberweis International and Oberweis Micro-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oberweis International position performs unexpectedly, Oberweis Micro-cap 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 Oberweis Micro-cap will offset losses from the drop in Oberweis Micro-cap's long position.The idea behind Oberweis International Opportunities and Oberweis Micro Cap Fund 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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