Correlation Between Ocean Park and FIRE Funds

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

By analyzing existing cross correlation between Ocean Park International and FIRE Funds Income, you can compare the effects of market volatilities on Ocean Park and FIRE Funds 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 FIRE Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ocean Park and FIRE Funds.

Diversification Opportunities for Ocean Park and FIRE Funds

-0.08

Correlation Coefficient

Ocean Park  FIRE Funds

Good diversification

The 3 months correlation between Ocean and FIRE is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Ocean Park International and FIRE Funds Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIRE Funds Income 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 International are associated (or correlated) with FIRE Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FIRE Funds Income has no effect on the direction of Ocean Park i.e., Ocean Park and FIRE Funds go up and down completely randomly.

Pair Corralation between Ocean Park and FIRE Funds

Given the investment horizon of 90 days Ocean Park International is expected to under-perform the FIRE Funds. In addition to that, Ocean Park is 2.46 times more volatile than FIRE Funds Income. It trades about -0.03 of its total potential returns per unit of risk. FIRE Funds Income is currently generating about 0.07 per unit of volatility. If you would invest  1,921  in FIRE Funds Income on December 27, 2024 and sell it today you would earn a total of  26.00  from holding FIRE Funds Income or generate 1.35% return on investment over 90 days.

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

Ocean Park International  vs.  FIRE Funds Income

Ocean Park International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ocean Park International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking signals, Ocean Park is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

FIRE Funds Income

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FIRE Funds Income are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, FIRE Funds is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Ocean Park and FIRE Funds

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

The idea behind Ocean Park International and FIRE Funds Income 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.