Correlation Between OVS SpA and Overlay Shares
Can any of the company-specific risk be diversified away by investing in both OVS SpA and Overlay Shares 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 OVS SpA and Overlay Shares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between OVS SpA and Overlay Shares Foreign, you can compare the effects of market volatilities on OVS SpA and Overlay Shares 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 OVS SpA with a short position of Overlay Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of OVS SpA and Overlay Shares.
Diversification Opportunities for OVS SpA and Overlay Shares
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between OVS and Overlay is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding OVS SpA and Overlay Shares Foreign in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Overlay Shares Foreign and OVS SpA 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 OVS SpA are associated (or correlated) with Overlay Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Overlay Shares Foreign has no effect on the direction of OVS SpA i.e., OVS SpA and Overlay Shares go up and down completely randomly.
Pair Corralation between OVS SpA and Overlay Shares
Considering the 90-day investment horizon OVS SpA is expected to under-perform the Overlay Shares. In addition to that, OVS SpA is 1.35 times more volatile than Overlay Shares Foreign. It trades about -0.09 of its total potential returns per unit of risk. Overlay Shares Foreign is currently generating about 0.03 per unit of volatility. If you would invest 2,453 in Overlay Shares Foreign on November 3, 2024 and sell it today you would earn a total of 24.00 from holding Overlay Shares Foreign or generate 0.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
OVS SpA vs. Overlay Shares Foreign
Performance |
| Timeline |
| OVS SpA |
| Overlay Shares Foreign |
OVS SpA and Overlay Shares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with OVS SpA and Overlay Shares
The main advantage of trading using opposite OVS SpA and Overlay Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OVS SpA position performs unexpectedly, Overlay Shares 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 Overlay Shares will offset losses from the drop in Overlay Shares' long position.| OVS SpA vs. Overlay Shares Large | OVS SpA vs. Overlay Shares Foreign | OVS SpA vs. Overlay Shares Municipal | OVS SpA vs. Overlay Shares Core |
| Overlay Shares vs. Overlay Shares Core | Overlay Shares vs. Overlay Shares Large | Overlay Shares vs. OVS SpA | Overlay Shares vs. Overlay Shares Municipal |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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