Correlation Between Dimensional Small and Opus Small

Can any of the company-specific risk be diversified away by investing in both Dimensional Small and Opus Small 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 Opus Small 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 Opus Small Cap, you can compare the effects of market volatilities on Dimensional Small and Opus Small 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 Opus Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Small and Opus Small.

Diversification Opportunities for Dimensional Small and Opus Small

0.99

Correlation Coefficient

Dimensional Small  Opus Small

No risk reduction

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

Pair Corralation between Dimensional Small and Opus Small

Given the investment horizon of 90 days Dimensional Small Cap is expected to generate 1.28 times more return on investment than Opus Small. However, Dimensional Small is 1.28 times more volatile than Opus Small Cap. It trades about 0.12 of its potential returns per unit of risk. Opus Small Cap is currently generating about -0.02 per unit of risk. If you would invest  6,727  in Dimensional Small Cap on September 16, 2024 and sell it today you would earn a total of  130.00  from holding Dimensional Small Cap or generate 1.93% 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.  Opus Small Cap

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.

Opus Small Cap

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Opus Small Cap are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable fundamental indicators, Opus Small is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Dimensional Small and Opus Small

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

The idea behind Dimensional Small Cap and Opus Small Cap 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.