Correlation Between Otter Creek and Boston Partners

Can any of the company-specific risk be diversified away by investing in both Otter Creek and Boston Partners 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 Otter Creek and Boston Partners into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Otter Creek Longshort and Boston Partners Global, you can compare the effects of market volatilities on Otter Creek and Boston Partners 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 Otter Creek with a short position of Boston Partners. Check out your portfolio center. Please also check ongoing floating volatility patterns of Otter Creek and Boston Partners.

Diversification Opportunities for Otter Creek and Boston Partners

-0.86

Correlation Coefficient

Otter Creek  Boston Partners

Pay attention - limited upside

The 3 months correlation between Otter and Boston is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Otter Creek Longshort and Boston Partners Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Partners Global and Otter Creek 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 Otter Creek Longshort are associated (or correlated) with Boston Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Partners Global has no effect on the direction of Otter Creek i.e., Otter Creek and Boston Partners go up and down completely randomly.

Pair Corralation between Otter Creek and Boston Partners

Assuming the 90 days horizon Otter Creek Longshort is expected to generate 0.63 times more return on investment than Boston Partners. However, Otter Creek Longshort is 1.6 times less risky than Boston Partners. It trades about 0.12 of its potential returns per unit of risk. Boston Partners Global is currently generating about -0.12 per unit of risk. If you would invest  1,447  in Otter Creek Longshort on September 4, 2024 and sell it today you would earn a total of  78.00  from holding Otter Creek Longshort or generate 5.39% return on investment over 90 days.

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

Otter Creek Longshort  vs.  Boston Partners Global

Otter Creek Longshort

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Otter Creek Longshort are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Otter Creek is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Boston Partners Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boston Partners Global has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Otter Creek and Boston Partners

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

The idea behind Otter Creek Longshort and Boston Partners Global 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.