Correlation Between Barclays ETN and OShares Europe

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

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

Diversification Opportunities for Barclays ETN and OShares Europe

0.54

Correlation Coefficient

Barclays ETN  OShares Europe

Very weak diversification

The 3 months correlation between Barclays and OShares is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Barclays ETN Select and OShares Europe Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OShares Europe Quality and Barclays ETN 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 Barclays ETN Select are associated (or correlated) with OShares Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OShares Europe Quality has no effect on the direction of Barclays ETN i.e., Barclays ETN and OShares Europe go up and down completely randomly.

Pair Corralation between Barclays ETN and OShares Europe

Given the investment horizon of 90 days Barclays ETN is expected to generate 1.1 times less return on investment than OShares Europe. In addition to that, Barclays ETN is 1.42 times more volatile than OShares Europe Quality. It trades about 0.13 of its total potential returns per unit of risk. OShares Europe Quality is currently generating about 0.19 per unit of volatility. If you would invest  2,738  in OShares Europe Quality on December 30, 2024 and sell it today you would earn a total of  298.00  from holding OShares Europe Quality or generate 10.88% return on investment over 90 days.

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

Barclays ETN Select  vs.  OShares Europe Quality

Barclays ETN Select

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Barclays ETN Select are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak primary indicators, Barclays ETN may actually be approaching a critical reversion point that can send shares even higher in April 2025.

OShares Europe Quality

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in OShares Europe Quality are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, OShares Europe may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Barclays ETN and OShares Europe

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

The idea behind Barclays ETN Select and OShares Europe Quality 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.