Correlation Between Steelpath Select and Omni Small-cap

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

By analyzing existing cross correlation between Steelpath Select 40 and Omni Small Cap Value, you can compare the effects of market volatilities on Steelpath Select and Omni Small-cap 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 Steelpath Select with a short position of Omni Small-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steelpath Select and Omni Small-cap.

Diversification Opportunities for Steelpath Select and Omni Small-cap

-0.14

Correlation Coefficient

Steelpath Select  Omni Small-cap

Good diversification

The 3 months correlation between Steelpath and Omni is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Steelpath Select 40 and Omni Small Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Omni Small Cap and Steelpath Select 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 Steelpath Select 40 are associated (or correlated) with Omni Small-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Omni Small Cap has no effect on the direction of Steelpath Select i.e., Steelpath Select and Omni Small-cap go up and down completely randomly.

Pair Corralation between Steelpath Select and Omni Small-cap

Assuming the 90 days horizon Steelpath Select 40 is expected to generate 0.86 times more return on investment than Omni Small-cap. However, Steelpath Select 40 is 1.16 times less risky than Omni Small-cap. It trades about 0.06 of its potential returns per unit of risk. Omni Small Cap Value is currently generating about -0.24 per unit of risk. If you would invest  768.00  in Steelpath Select 40 on December 2, 2024 and sell it today you would earn a total of  27.00  from holding Steelpath Select 40 or generate 3.52% return on investment over 90 days.

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

Steelpath Select 40  vs.  Omni Small Cap Value

Steelpath Select

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Steelpath Select 40 are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Steelpath Select is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Omni Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Omni Small Cap Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Steelpath Select and Omni Small-cap

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

The idea behind Steelpath Select 40 and Omni Small Cap Value 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.