Correlation Between OShares Quality and Via Renewables

Can any of the company-specific risk be diversified away by investing in both OShares Quality and Via Renewables 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 OShares Quality and Via Renewables into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between OShares Quality Dividend and Via Renewables, you can compare the effects of market volatilities on OShares Quality and Via Renewables 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 OShares Quality with a short position of Via Renewables. Check out your portfolio center. Please also check ongoing floating volatility patterns of OShares Quality and Via Renewables.

Diversification Opportunities for OShares Quality and Via Renewables

0.3

Correlation Coefficient

OShares Quality  Via Renewables

Weak diversification

The 3 months correlation between OShares and Via is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding OShares Quality Dividend and Via Renewables in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Via Renewables and OShares Quality 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 OShares Quality Dividend are associated (or correlated) with Via Renewables. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Via Renewables has no effect on the direction of OShares Quality i.e., OShares Quality and Via Renewables go up and down completely randomly.

Pair Corralation between OShares Quality and Via Renewables

Given the investment horizon of 90 days OShares Quality Dividend is expected to generate 0.29 times more return on investment than Via Renewables. However, OShares Quality Dividend is 3.39 times less risky than Via Renewables. It trades about -0.15 of its potential returns per unit of risk. Via Renewables is currently generating about -0.11 per unit of risk. If you would invest  4,838  in OShares Quality Dividend on February 5, 2024 and sell it today you would lose (91.00) from holding OShares Quality Dividend or give up 1.88% of portfolio value over 90 days.

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

OShares Quality Dividend  vs.  Via Renewables

OShares Quality Dividend

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days OShares Quality Dividend has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, OShares Quality is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Via Renewables

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Via Renewables are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Via Renewables may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with OShares Quality and Via Renewables

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

The idea behind OShares Quality Dividend and Via Renewables 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.