Correlation Between Oppenheimer Senior and First Trust

Can any of the company-specific risk be diversified away by investing in both Oppenheimer Senior and First 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 Oppenheimer Senior and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Oppenheimer Senior Floating and First Trust Short, you can compare the effects of market volatilities on Oppenheimer Senior and First 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 Oppenheimer Senior with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oppenheimer Senior and First Trust.

Diversification Opportunities for Oppenheimer Senior and First Trust

0.75

Correlation Coefficient

Oppenheimer Senior  First Trust

Poor diversification

The 3 months correlation between Oppenheimer and First is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Oppenheimer Senior Floating and First Trust Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Short and Oppenheimer Senior 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 Oppenheimer Senior Floating are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Short has no effect on the direction of Oppenheimer Senior i.e., Oppenheimer Senior and First Trust go up and down completely randomly.

Pair Corralation between Oppenheimer Senior and First Trust

Assuming the 90 days horizon Oppenheimer Senior Floating is expected to under-perform the First Trust. But the mutual fund apears to be less risky and, when comparing its historical volatility, Oppenheimer Senior Floating is 1.51 times less risky than First Trust. The mutual fund trades about -0.49 of its potential returns per unit of risk. The First Trust Short is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  1,804  in First Trust Short on December 4, 2024 and sell it today you would lose (2.00) from holding First Trust Short or give up 0.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Oppenheimer Senior Floating  vs.  First Trust Short

Oppenheimer Senior

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Oppenheimer Senior Floating are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Oppenheimer Senior is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

First Trust Short

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Short are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, First Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Oppenheimer Senior and First Trust

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

The idea behind Oppenheimer Senior Floating and First Trust Short 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.