Correlation Between IShares 0 and Ocean Park

Can any of the company-specific risk be diversified away by investing in both IShares 0 and Ocean Park 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 IShares 0 and Ocean Park into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares 0 5 Year and Ocean Park High, you can compare the effects of market volatilities on IShares 0 and Ocean Park 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 IShares 0 with a short position of Ocean Park. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares 0 and Ocean Park.

Diversification Opportunities for IShares 0 and Ocean Park

0.8

Correlation Coefficient

IShares 0  Ocean Park

Very poor diversification

The 3 months correlation between IShares and Ocean is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding iShares 0 5 Year and Ocean Park High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ocean Park High and IShares 0 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 iShares 0 5 Year are associated (or correlated) with Ocean Park. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ocean Park High has no effect on the direction of IShares 0 i.e., IShares 0 and Ocean Park go up and down completely randomly.

Pair Corralation between IShares 0 and Ocean Park

Given the investment horizon of 90 days iShares 0 5 Year is expected to generate 0.85 times more return on investment than Ocean Park. However, iShares 0 5 Year is 1.18 times less risky than Ocean Park. It trades about 0.24 of its potential returns per unit of risk. Ocean Park High is currently generating about 0.16 per unit of risk. If you would invest  4,217  in iShares 0 5 Year on September 2, 2024 and sell it today you would earn a total of  113.00  from holding iShares 0 5 Year or generate 2.68% return on investment over 90 days.

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

iShares 0 5 Year  vs.  Ocean Park High

iShares 0 5

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares 0 5 Year are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, IShares 0 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Ocean Park High

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ocean Park High are ranked lower than 12 (%) 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 current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with IShares 0 and Ocean Park

The main advantage of trading using opposite IShares 0 and Ocean Park positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares 0 position performs unexpectedly, Ocean Park 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 Ocean Park will offset losses from the drop in Ocean Park's long position.

The idea behind iShares 0 5 Year and Ocean Park High 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.

Check out your portfolio center.

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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.