Correlation Between IShares Fallen and Ocean Park

Can any of the company-specific risk be diversified away by investing in both IShares Fallen 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 Fallen 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 Fallen Angels and Ocean Park High, you can compare the effects of market volatilities on IShares Fallen 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 Fallen with a short position of Ocean Park. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Fallen and Ocean Park.

Diversification Opportunities for IShares Fallen and Ocean Park

0.95

Correlation Coefficient

IShares Fallen  Ocean Park

Almost no diversification

The 3 months correlation between IShares and Ocean is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding iShares Fallen Angels 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 Fallen 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 Fallen Angels 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 Fallen i.e., IShares Fallen and Ocean Park go up and down completely randomly.

Pair Corralation between IShares Fallen and Ocean Park

Given the investment horizon of 90 days iShares Fallen Angels is expected to generate 1.19 times more return on investment than Ocean Park. However, IShares Fallen is 1.19 times more volatile than Ocean Park High. It trades about -0.03 of its potential returns per unit of risk. Ocean Park High is currently generating about -0.1 per unit of risk. If you would invest  2,707  in iShares Fallen Angels on August 17, 2024 and sell it today you would lose (6.00) from holding iShares Fallen Angels or give up 0.22% of portfolio value over 90 days.

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

iShares Fallen Angels  vs.  Ocean Park High

iShares Fallen Angels

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Fallen Angels are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, IShares Fallen is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Ocean Park High

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ocean Park High are ranked lower than 10 (%) 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 latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with IShares Fallen and Ocean Park

The main advantage of trading using opposite IShares Fallen and Ocean Park positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Fallen 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 Fallen Angels 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.