Correlation Between Opera and DriveItAway

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

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

Diversification Opportunities for Opera and DriveItAway

0.17

Correlation Coefficient

Opera  DriveItAway

Average diversification

The 3 months correlation between Opera and DriveItAway is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Opera and DriveItAway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DriveItAway and Opera 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 Opera are associated (or correlated) with DriveItAway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DriveItAway has no effect on the direction of Opera i.e., Opera and DriveItAway go up and down completely randomly.

Pair Corralation between Opera and DriveItAway

Given the investment horizon of 90 days Opera is expected to generate 13.36 times less return on investment than DriveItAway. But when comparing it to its historical volatility, Opera is 6.93 times less risky than DriveItAway. It trades about 0.04 of its potential returns per unit of risk. DriveItAway is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  11.00  in DriveItAway on December 5, 2024 and sell it today you would lose (8.00) from holding DriveItAway or give up 72.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.01%
Values	Daily Returns

Opera  vs.  DriveItAway

Opera

Risk-Adjusted Performance

Very Weak

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

DriveItAway

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DriveItAway are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, DriveItAway showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Opera and DriveItAway

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

The idea behind Opera and DriveItAway 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.

Check out your portfolio center.

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 Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.