Correlation Between OppFi and Dave
Can any of the company-specific risk be diversified away by investing in both OppFi and Dave 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 OppFi and Dave into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between OppFi Inc and Dave Inc, you can compare the effects of market volatilities on OppFi and Dave 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 OppFi with a short position of Dave. Check out your portfolio center. Please also check ongoing floating volatility patterns of OppFi and Dave.
Diversification Opportunities for OppFi and Dave
Very poor diversification
The 3 months correlation between OppFi and Dave is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding OppFi Inc and Dave Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dave Inc and OppFi 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 OppFi Inc are associated (or correlated) with Dave. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dave Inc has no effect on the direction of OppFi i.e., OppFi and Dave go up and down completely randomly.
Pair Corralation between OppFi and Dave
Given the investment horizon of 90 days OppFi is expected to generate 2.19 times less return on investment than Dave. But when comparing it to its historical volatility, OppFi Inc is 1.93 times less risky than Dave. It trades about 0.33 of its potential returns per unit of risk. Dave Inc is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 3,927 in Dave Inc on August 27, 2024 and sell it today you would earn a total of 4,595 from holding Dave Inc or generate 117.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
OppFi Inc vs. Dave Inc
Performance |
| Timeline |
| OppFi Inc |
| Dave Inc |
OppFi and Dave Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with OppFi and Dave
The main advantage of trading using opposite OppFi and Dave positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OppFi position performs unexpectedly, Dave 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 Dave will offset losses from the drop in Dave's long position.The idea behind OppFi Inc and Dave Inc 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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