Correlation Between Opus Small and IShares Core

Can any of the company-specific risk be diversified away by investing in both Opus Small and IShares Core 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 IShares Core 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 iShares Core SP, you can compare the effects of market volatilities on Opus Small and IShares Core 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 IShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Opus Small and IShares Core.

Diversification Opportunities for Opus Small and IShares Core

0.97

Correlation Coefficient

Opus Small  IShares Core

Almost no diversification

The 3 months correlation between Opus and IShares is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Opus Small Cap and iShares Core SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core SP 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 IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core SP has no effect on the direction of Opus Small i.e., Opus Small and IShares Core go up and down completely randomly.

Pair Corralation between Opus Small and IShares Core

Given the investment horizon of 90 days Opus Small is expected to generate 2.43 times less return on investment than IShares Core. In addition to that, Opus Small is 1.06 times more volatile than iShares Core SP. It trades about 0.01 of its total potential returns per unit of risk. iShares Core SP is currently generating about 0.04 per unit of volatility. If you would invest  6,141  in iShares Core SP on September 25, 2024 and sell it today you would earn a total of  124.00  from holding iShares Core SP or generate 2.02% return on investment over 90 days.

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

Opus Small Cap  vs.  iShares Core SP

Opus Small Cap

Risk-Adjusted Performance

1 of 100

Very 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.

iShares Core SP

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SP are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward-looking indicators, IShares Core is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Opus Small and IShares Core

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

The idea behind Opus Small Cap and iShares Core SP 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.