Correlation Between Extended Market and Oshaughnessy Market
Can any of the company-specific risk be diversified away by investing in both Extended Market and Oshaughnessy Market 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 Extended Market and Oshaughnessy Market into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Extended Market Index and Oshaughnessy Market Leaders, you can compare the effects of market volatilities on Extended Market and Oshaughnessy Market 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 Extended Market with a short position of Oshaughnessy Market. Check out your portfolio center. Please also check ongoing floating volatility patterns of Extended Market and Oshaughnessy Market.
Diversification Opportunities for Extended Market and Oshaughnessy Market
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Extended and Oshaughnessy is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Extended Market Index and Oshaughnessy Market Leaders in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oshaughnessy Market and Extended Market 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 Extended Market Index are associated (or correlated) with Oshaughnessy Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oshaughnessy Market has no effect on the direction of Extended Market i.e., Extended Market and Oshaughnessy Market go up and down completely randomly.
Pair Corralation between Extended Market and Oshaughnessy Market
Assuming the 90 days horizon Extended Market Index is expected to under-perform the Oshaughnessy Market. In addition to that, Extended Market is 2.84 times more volatile than Oshaughnessy Market Leaders. It trades about -0.28 of its total potential returns per unit of risk. Oshaughnessy Market Leaders is currently generating about -0.23 per unit of volatility. If you would invest 2,036 in Oshaughnessy Market Leaders on October 11, 2024 and sell it today you would lose (92.00) from holding Oshaughnessy Market Leaders or give up 4.52% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Extended Market Index vs. Oshaughnessy Market Leaders
Performance |
| Timeline |
| Extended Market Index |
| Oshaughnessy Market |
Extended Market and Oshaughnessy Market Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Extended Market and Oshaughnessy Market
The main advantage of trading using opposite Extended Market and Oshaughnessy Market positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extended Market position performs unexpectedly, Oshaughnessy Market 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 Oshaughnessy Market will offset losses from the drop in Oshaughnessy Market's long position.| Extended Market vs. M Large Cap | Extended Market vs. Qs Large Cap | Extended Market vs. Fundamental Large Cap | Extended Market vs. Guidemark Large Cap |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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