Correlation Between Dimensional Small and Oppenheimer Russell

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

By analyzing existing cross correlation between Dimensional Small Cap and Oppenheimer Russell 2000, you can compare the effects of market volatilities on Dimensional Small and Oppenheimer Russell 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 Dimensional Small with a short position of Oppenheimer Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Small and Oppenheimer Russell.

Diversification Opportunities for Dimensional Small and Oppenheimer Russell

0.99

Correlation Coefficient

Dimensional Small  Oppenheimer Russell

No risk reduction

The 3 months correlation between Dimensional and Oppenheimer is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Small Cap and Oppenheimer Russell 2000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oppenheimer Russell 2000 and Dimensional 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 Dimensional Small Cap are associated (or correlated) with Oppenheimer Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oppenheimer Russell 2000 has no effect on the direction of Dimensional Small i.e., Dimensional Small and Oppenheimer Russell go up and down completely randomly.

Pair Corralation between Dimensional Small and Oppenheimer Russell

Given the investment horizon of 90 days Dimensional Small is expected to generate 1.2 times less return on investment than Oppenheimer Russell. But when comparing it to its historical volatility, Dimensional Small Cap is 1.09 times less risky than Oppenheimer Russell. It trades about 0.1 of its potential returns per unit of risk. Oppenheimer Russell 2000 is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  3,867  in Oppenheimer Russell 2000 on September 17, 2024 and sell it today you would earn a total of  350.00  from holding Oppenheimer Russell 2000 or generate 9.05% return on investment over 90 days.

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

Dimensional Small Cap  vs.  Oppenheimer Russell 2000

Dimensional Small Cap

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional Small Cap are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Dimensional Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Oppenheimer Russell 2000

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Oppenheimer Russell 2000 are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, Oppenheimer Russell may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Dimensional Small and Oppenheimer Russell

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

The idea behind Dimensional Small Cap and Oppenheimer Russell 2000 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 Transaction History module to view history of all your transactions and understand their impact on performance.