Correlation Between Overlay Shares and Opus Small
Can any of the company-specific risk be diversified away by investing in both Overlay Shares and Opus 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 Overlay Shares and Opus Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Overlay Shares Municipal and Opus Small Cap, you can compare the effects of market volatilities on Overlay Shares and Opus 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 Overlay Shares with a short position of Opus Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Overlay Shares and Opus Small.
Diversification Opportunities for Overlay Shares and Opus Small
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Overlay and Opus is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Overlay Shares Municipal and Opus Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Opus Small Cap and Overlay Shares 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 Overlay Shares Municipal are associated (or correlated) with Opus Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Opus Small Cap has no effect on the direction of Overlay Shares i.e., Overlay Shares and Opus Small go up and down completely randomly.
Pair Corralation between Overlay Shares and Opus Small
Considering the 90-day investment horizon Overlay Shares is expected to generate 5.32 times less return on investment than Opus Small. But when comparing it to its historical volatility, Overlay Shares Municipal is 4.12 times less risky than Opus Small. It trades about 0.2 of its potential returns per unit of risk. Opus Small Cap is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 3,801 in Opus Small Cap on August 28, 2024 and sell it today you would earn a total of 287.00 from holding Opus Small Cap or generate 7.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Overlay Shares Municipal vs. Opus Small Cap
Performance |
| Timeline |
| Overlay Shares Municipal |
| Opus Small Cap |
Overlay Shares and Opus Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Overlay Shares and Opus Small
The main advantage of trading using opposite Overlay Shares and Opus Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Overlay Shares position performs unexpectedly, Opus 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 Opus Small will offset losses from the drop in Opus Small's long position.| Overlay Shares vs. Franklin Liberty Intermediate | Overlay Shares vs. Hartford Municipal Opportunities | Overlay Shares vs. IQ MacKay Municipal |
| Opus Small vs. Invesco PureBeta MSCI | Opus Small vs. Aquagold International | Opus Small vs. Morningstar Unconstrained Allocation | Opus Small vs. High Yield Municipal 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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