Correlation Between Opus Small and American Customer

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

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

Diversification Opportunities for Opus Small and American Customer

0.66

Correlation Coefficient

Opus Small  American Customer

Poor diversification

The 3 months correlation between Opus and American is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Opus Small Cap and American Customer Satisfaction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Customer and Opus Small 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 Opus Small Cap are associated (or correlated) with American Customer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Customer has no effect on the direction of Opus Small i.e., Opus Small and American Customer go up and down completely randomly.

Pair Corralation between Opus Small and American Customer

Given the investment horizon of 90 days Opus Small Cap is expected to under-perform the American Customer. But the etf apears to be less risky and, when comparing its historical volatility, Opus Small Cap is 1.16 times less risky than American Customer. The etf trades about -0.07 of its potential returns per unit of risk. The American Customer Satisfaction is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  6,169  in American Customer Satisfaction on December 27, 2024 and sell it today you would lose (132.00) from holding American Customer Satisfaction or give up 2.14% of portfolio value over 90 days.

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

Opus Small Cap  vs.  American Customer Satisfaction

Opus Small Cap

Risk-Adjusted Performance

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 latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

American Customer

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Customer Satisfaction has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, American Customer is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Opus Small and American Customer

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

The idea behind Opus Small Cap and American Customer Satisfaction 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.