Correlation Between Opus Small and American Customer

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

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

Diversification Opportunities for Opus Small and American Customer

0.73

Correlation Coefficient

Opus Small  American Customer

Poor diversification

The 3 months correlation between Opus and American is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Opus Small Cap and American Customer Satisfaction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Customer and Opus Small 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 Opus Small Cap are associated (or correlated) with American Customer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Customer has no effect on the direction of Opus Small i.e., Opus Small and American Customer go up and down completely randomly.

Pair Corralation between Opus Small and American Customer

Given the investment horizon of 90 days Opus Small Cap is expected to under-perform the American Customer. In addition to that, Opus Small is 1.3 times more volatile than American Customer Satisfaction. It trades about -0.45 of its total potential returns per unit of risk. American Customer Satisfaction is currently generating about 0.09 per unit of volatility. If you would invest  6,152  in American Customer Satisfaction on September 26, 2024 and sell it today you would earn a total of  87.30  from holding American Customer Satisfaction or generate 1.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Opus Small Cap  vs.  American Customer Satisfaction

Opus Small Cap

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Opus Small Cap are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable fundamental indicators, Opus Small is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

American Customer

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Customer Satisfaction are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, American Customer may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Opus Small and American Customer

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

The idea behind Opus Small Cap and American Customer Satisfaction 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.