Correlation Between IShares SP and Opus Small

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

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

Diversification Opportunities for IShares SP and Opus Small

0.93

Correlation Coefficient

IShares SP  Opus Small

Almost no diversification

The 3 months correlation between IShares and Opus is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP Small Cap and Opus Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Opus Small Cap and IShares SP 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 iShares SP Small Cap are associated (or correlated) with Opus Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Opus Small Cap has no effect on the direction of IShares SP i.e., IShares SP and Opus Small go up and down completely randomly.

Pair Corralation between IShares SP and Opus Small

Considering the 90-day investment horizon iShares SP Small Cap is expected to generate 1.22 times more return on investment than Opus Small. However, IShares SP is 1.22 times more volatile than Opus Small Cap. It trades about 0.04 of its potential returns per unit of risk. Opus Small Cap is currently generating about 0.0 per unit of risk. If you would invest  10,543  in iShares SP Small Cap on October 1, 2024 and sell it today you would earn a total of  345.00  from holding iShares SP Small Cap or generate 3.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

iShares SP Small Cap  vs.  Opus Small Cap

iShares SP Small

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SP Small Cap are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward-looking indicators, IShares SP is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Opus Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Opus Small Cap has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, Opus Small is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with IShares SP and Opus Small

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

The idea behind iShares SP Small Cap and Opus Small Cap 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.