Correlation Between Cardinal Small and Omni Small-cap

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

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

Diversification Opportunities for Cardinal Small and Omni Small-cap

-0.09

Correlation Coefficient

Cardinal Small  Omni Small-cap

Good diversification

The 3 months correlation between Cardinal and Omni is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Small Cap 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 Cardinal Small 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 Cardinal Small Cap are associated (or correlated) with Omni Small-cap. 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 Cardinal Small i.e., Cardinal Small and Omni Small-cap go up and down completely randomly.

Pair Corralation between Cardinal Small and Omni Small-cap

Assuming the 90 days horizon Cardinal Small Cap is expected to under-perform the Omni Small-cap. But the mutual fund apears to be less risky and, when comparing its historical volatility, Cardinal Small Cap is 8.32 times less risky than Omni Small-cap. The mutual fund trades about -0.21 of its potential returns per unit of risk. The Omni Small Cap Value is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,956  in Omni Small Cap Value on August 31, 2024 and sell it today you would earn a total of  181.00  from holding Omni Small Cap Value or generate 9.25% return on investment over 90 days.

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

Cardinal Small Cap  vs.  Omni Small Cap Value

Cardinal Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cardinal Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Cardinal Small 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

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Omni Small Cap Value are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Omni Small-cap may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Cardinal Small and Omni Small-cap

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

The idea behind Cardinal Small Cap 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..