Correlation Between Short Duration and Omni Small

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

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

Diversification Opportunities for Short Duration and Omni Small

0.09

Correlation Coefficient

Short Duration  Omni Small

Significant diversification

The 3 months correlation between Short and Omni is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Short Duration Strategic and Omni Small Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Omni Small Cap and Short Duration 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 Short Duration Strategic are associated (or correlated) with Omni Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Omni Small Cap has no effect on the direction of Short Duration i.e., Short Duration and Omni Small go up and down completely randomly.

Pair Corralation between Short Duration and Omni Small

Assuming the 90 days horizon Short Duration Strategic is expected to generate 0.1 times more return on investment than Omni Small. However, Short Duration Strategic is 9.59 times less risky than Omni Small. It trades about 0.13 of its potential returns per unit of risk. Omni Small Cap Value is currently generating about 0.01 per unit of risk. If you would invest  802.00  in Short Duration Strategic on August 22, 2024 and sell it today you would earn a total of  94.00  from holding Short Duration Strategic or generate 11.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Short Duration Strategic  vs.  Omni Small Cap Value

Short Duration Strategic

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Short Duration Strategic are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Short Duration is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Omni Small Cap

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Omni Small Cap Value are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Omni Small may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Short Duration and Omni Small

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

The idea behind Short Duration Strategic and Omni Small Cap Value 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.