Correlation Between Ocean Park and IShares Trust

Can any of the company-specific risk be diversified away by investing in both Ocean Park and IShares Trust 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 Ocean Park and IShares Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ocean Park High and iShares Trust , you can compare the effects of market volatilities on Ocean Park and IShares Trust 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 Ocean Park with a short position of IShares Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ocean Park and IShares Trust.

Diversification Opportunities for Ocean Park and IShares Trust

0.46

Correlation Coefficient

Ocean Park  IShares Trust

Very weak diversification

The 3 months correlation between Ocean and IShares is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Ocean Park High and iShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Trust and Ocean Park 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 Ocean Park High are associated (or correlated) with IShares Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Trust has no effect on the direction of Ocean Park i.e., Ocean Park and IShares Trust go up and down completely randomly.

Pair Corralation between Ocean Park and IShares Trust

Given the investment horizon of 90 days Ocean Park is expected to generate 11.92 times less return on investment than IShares Trust. But when comparing it to its historical volatility, Ocean Park High is 1.4 times less risky than IShares Trust. It trades about 0.02 of its potential returns per unit of risk. iShares Trust is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,011  in iShares Trust on December 19, 2024 and sell it today you would earn a total of  51.00  from holding iShares Trust or generate 2.54% return on investment over 90 days.

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

Ocean Park High  vs.  iShares Trust

Ocean Park High

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ocean Park High are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward-looking signals, Ocean Park is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

iShares Trust

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Trust are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable fundamental indicators, IShares Trust 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 Ocean Park and IShares Trust

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

The idea behind Ocean Park High and iShares Trust 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.