Correlation Between Ocean Park and First Trust

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

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

Diversification Opportunities for Ocean Park and First Trust

0.35

Correlation Coefficient

Ocean Park  First Trust

Weak diversification

The 3 months correlation between Ocean and First is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Ocean Park High and First Trust IndustrialsProduce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Industri and Ocean Park 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 Ocean Park High are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Industri has no effect on the direction of Ocean Park i.e., Ocean Park and First Trust go up and down completely randomly.

Pair Corralation between Ocean Park and First Trust

Given the investment horizon of 90 days Ocean Park High is expected to generate 0.23 times more return on investment than First Trust. However, Ocean Park High is 4.33 times less risky than First Trust. It trades about -0.09 of its potential returns per unit of risk. First Trust IndustrialsProducer is currently generating about -0.33 per unit of risk. If you would invest  2,528  in Ocean Park High on September 22, 2024 and sell it today you would lose (12.00) from holding Ocean Park High or give up 0.47% of portfolio value over 90 days.

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

Ocean Park High  vs.  First Trust IndustrialsProduce

Ocean Park High

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ocean Park High has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

First Trust Industri

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Trust IndustrialsProducer has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, First Trust is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Ocean Park and First Trust

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

The idea behind Ocean Park High and First Trust IndustrialsProducer 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.