Correlation Between General American and OFS Credit

Can any of the company-specific risk be diversified away by investing in both General American and OFS Credit 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 General American and OFS Credit into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between General American Investors and OFS Credit, you can compare the effects of market volatilities on General American and OFS Credit 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 General American with a short position of OFS Credit. Check out your portfolio center. Please also check ongoing floating volatility patterns of General American and OFS Credit.

Diversification Opportunities for General American and OFS Credit

-0.08

Correlation Coefficient

General American  OFS Credit

Good diversification

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

Pair Corralation between General American and OFS Credit

Assuming the 90 days trading horizon General American Investors is expected to under-perform the OFS Credit. But the preferred stock apears to be less risky and, when comparing its historical volatility, General American Investors is 1.33 times less risky than OFS Credit. The preferred stock trades about -0.18 of its potential returns per unit of risk. The OFS Credit is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,462  in OFS Credit on September 22, 2024 and sell it today you would earn a total of  0.00  from holding OFS Credit or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

General American Investors  vs.  OFS Credit

General American Inv

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days General American Investors has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, General American is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

OFS Credit

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in OFS Credit are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, OFS Credit is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with General American and OFS Credit

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

The idea behind General American Investors and OFS Credit 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.