Correlation Between Oberweis China and Oberweis Small-cap

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

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

Diversification Opportunities for Oberweis China and Oberweis Small-cap

0.45

Correlation Coefficient

Oberweis China  Oberweis Small-cap

Very weak diversification

The 3 months correlation between Oberweis and Oberweis is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Oberweis China Opportunities and Oberweis Small Cap Opportuniti in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oberweis Small Cap and Oberweis China 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 Oberweis China Opportunities are associated (or correlated) with Oberweis Small-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oberweis Small Cap has no effect on the direction of Oberweis China i.e., Oberweis China and Oberweis Small-cap go up and down completely randomly.

Pair Corralation between Oberweis China and Oberweis Small-cap

Assuming the 90 days horizon Oberweis China is expected to generate 1.01 times less return on investment than Oberweis Small-cap. In addition to that, Oberweis China is 1.74 times more volatile than Oberweis Small Cap Opportunities. It trades about 0.08 of its total potential returns per unit of risk. Oberweis Small Cap Opportunities is currently generating about 0.15 per unit of volatility. If you would invest  2,502  in Oberweis Small Cap Opportunities on September 5, 2024 and sell it today you would earn a total of  278.00  from holding Oberweis Small Cap Opportunities or generate 11.11% return on investment over 90 days.

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

Oberweis China Opportunities  vs.  Oberweis Small Cap Opportuniti

Oberweis China Oppor

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Oberweis China Opportunities are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical indicators, Oberweis China may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Oberweis Small Cap

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Oberweis Small Cap Opportunities are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Oberweis Small-cap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Oberweis China and Oberweis Small-cap

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

The idea behind Oberweis China Opportunities and Oberweis Small Cap Opportunities 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.