Correlation Between IShares Edge and Ocean Park

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

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

Diversification Opportunities for IShares Edge and Ocean Park

0.88

Correlation Coefficient

IShares Edge  Ocean Park

Very poor diversification

The 3 months correlation between IShares and Ocean is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding iShares Edge MSCI and Ocean Park International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ocean Park International and IShares Edge 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 Edge MSCI are associated (or correlated) with Ocean Park. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ocean Park International has no effect on the direction of IShares Edge i.e., IShares Edge and Ocean Park go up and down completely randomly.

Pair Corralation between IShares Edge and Ocean Park

Given the investment horizon of 90 days iShares Edge MSCI is expected to under-perform the Ocean Park. But the etf apears to be less risky and, when comparing its historical volatility, iShares Edge MSCI is 1.1 times less risky than Ocean Park. The etf trades about -0.02 of its potential returns per unit of risk. The Ocean Park International is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,512  in Ocean Park International on September 12, 2024 and sell it today you would earn a total of  17.00  from holding Ocean Park International or generate 0.68% return on investment over 90 days.

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

iShares Edge MSCI  vs.  Ocean Park International

iShares Edge MSCI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Edge MSCI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, IShares Edge is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Ocean Park International

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ocean Park International are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with IShares Edge and Ocean Park

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

The idea behind iShares Edge MSCI and Ocean Park International 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.