Correlation Between Omni Small-cap and Shelton Funds

Can any of the company-specific risk be diversified away by investing in both Omni Small-cap and Shelton Funds 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 Omni Small-cap and Shelton Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Omni Small Cap Value and Shelton Funds , you can compare the effects of market volatilities on Omni Small-cap and Shelton Funds 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 Omni Small-cap with a short position of Shelton Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Omni Small-cap and Shelton Funds.

Diversification Opportunities for Omni Small-cap and Shelton Funds

0.8

Correlation Coefficient

Omni Small-cap  Shelton Funds

Very poor diversification

The 3 months correlation between Omni and Shelton is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Omni Small Cap Value and Shelton Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shelton Funds and Omni Small-cap 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 Omni Small Cap Value are associated (or correlated) with Shelton Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shelton Funds has no effect on the direction of Omni Small-cap i.e., Omni Small-cap and Shelton Funds go up and down completely randomly.

Pair Corralation between Omni Small-cap and Shelton Funds

Assuming the 90 days horizon Omni Small Cap Value is expected to generate 1.23 times more return on investment than Shelton Funds. However, Omni Small-cap is 1.23 times more volatile than Shelton Funds . It trades about 0.07 of its potential returns per unit of risk. Shelton Funds is currently generating about 0.08 per unit of risk. If you would invest  1,887  in Omni Small Cap Value on August 31, 2024 and sell it today you would earn a total of  250.00  from holding Omni Small Cap Value or generate 13.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Omni Small Cap Value  vs.  Shelton Funds

Omni Small Cap

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Omni Small Cap Value are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Omni Small-cap may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Shelton Funds

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shelton Funds are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Shelton Funds may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Omni Small-cap and Shelton Funds

The main advantage of trading using opposite Omni Small-cap and Shelton Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Omni Small-cap position performs unexpectedly, Shelton Funds 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 Shelton Funds will offset losses from the drop in Shelton Funds' long position.

The idea behind Omni Small Cap Value and Shelton Funds 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.