Correlation Between Ocean Park and IPath Series

Can any of the company-specific risk be diversified away by investing in both Ocean Park and IPath Series 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 Ocean Park and IPath Series into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ocean Park High and iPath Series B, you can compare the effects of market volatilities on Ocean Park and IPath Series 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 Ocean Park with a short position of IPath Series. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ocean Park and IPath Series.

Diversification Opportunities for Ocean Park and IPath Series

-0.23

Correlation Coefficient

Ocean Park  IPath Series

Very good diversification

The 3 months correlation between Ocean and IPath is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Ocean Park High and iPath Series B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iPath Series B and Ocean Park 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 Ocean Park High are associated (or correlated) with IPath Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iPath Series B has no effect on the direction of Ocean Park i.e., Ocean Park and IPath Series go up and down completely randomly.

Pair Corralation between Ocean Park and IPath Series

Given the investment horizon of 90 days Ocean Park High is expected to generate 0.1 times more return on investment than IPath Series. However, Ocean Park High is 9.73 times less risky than IPath Series. It trades about 0.12 of its potential returns per unit of risk. iPath Series B is currently generating about -0.03 per unit of risk. If you would invest  2,521  in Ocean Park High on August 30, 2024 and sell it today you would earn a total of  39.00  from holding Ocean Park High or generate 1.55% return on investment over 90 days.

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

Ocean Park High  vs.  iPath Series B

Ocean Park High

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ocean Park High are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward-looking signals, Ocean Park is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

iPath Series B

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iPath Series B has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, IPath Series is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ocean Park and IPath Series

The main advantage of trading using opposite Ocean Park and IPath Series positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ocean Park position performs unexpectedly, IPath Series 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 IPath Series will offset losses from the drop in IPath Series' long position.

The idea behind Ocean Park High and iPath Series B 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.

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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.