Correlation Between Cutler Equity and Oberweis China

Can any of the company-specific risk be diversified away by investing in both Cutler Equity and Oberweis China 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 Cutler Equity and Oberweis China into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cutler Equity and Oberweis China Opportunities, you can compare the effects of market volatilities on Cutler Equity and Oberweis China 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 Cutler Equity with a short position of Oberweis China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cutler Equity and Oberweis China.

Diversification Opportunities for Cutler Equity and Oberweis China

0.3

Correlation Coefficient

Cutler Equity  Oberweis China

Weak diversification

The 3 months correlation between Cutler and Oberweis is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Cutler Equity and Oberweis China Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oberweis China Oppor and Cutler Equity 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 Cutler Equity are associated (or correlated) with Oberweis China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oberweis China Oppor has no effect on the direction of Cutler Equity i.e., Cutler Equity and Oberweis China go up and down completely randomly.

Pair Corralation between Cutler Equity and Oberweis China

Assuming the 90 days horizon Cutler Equity is expected to generate 8.49 times less return on investment than Oberweis China. But when comparing it to its historical volatility, Cutler Equity is 2.8 times less risky than Oberweis China. It trades about 0.04 of its potential returns per unit of risk. Oberweis China Opportunities is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  697.00  in Oberweis China Opportunities on December 30, 2024 and sell it today you would earn a total of  106.00  from holding Oberweis China Opportunities or generate 15.21% return on investment over 90 days.

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

Cutler Equity  vs.  Oberweis China Opportunities

Cutler Equity

Risk-Adjusted Performance

Insignificant

Over the last 90 days Cutler Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical indicators, Cutler Equity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Oberweis China Oppor

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Oberweis China Opportunities are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Oberweis China showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cutler Equity and Oberweis China

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

The idea behind Cutler Equity and Oberweis China Opportunities 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.