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 International 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

0.04

Correlation Coefficient

Ocean Park  IShares Trust

Significant diversification

The 3 months correlation between Ocean and IShares is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Ocean Park International 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 International 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 International is expected to under-perform the IShares Trust. But the etf apears to be less risky and, when comparing its historical volatility, Ocean Park International is 1.24 times less risky than IShares Trust. The etf trades about -0.02 of its potential returns per unit of risk. The iShares Trust is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  3,194  in iShares Trust on December 25, 2024 and sell it today you would lose (2.00) from holding iShares Trust or give up 0.06% of portfolio value over 90 days.

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

Ocean Park International  vs.  iShares Trust

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 current stock price disturbance, may contribute to short-term losses for the investors.

iShares Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, IShares Trust is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

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 International 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.

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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 Global Correlations module to find global opportunities by holding instruments from different markets.