Correlation Between Opus Small and Aptus Drawdown

Can any of the company-specific risk be diversified away by investing in both Opus Small and Aptus Drawdown 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 Aptus Drawdown 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 Aptus Drawdown Managed, you can compare the effects of market volatilities on Opus Small and Aptus Drawdown 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 Aptus Drawdown. Check out your portfolio center. Please also check ongoing floating volatility patterns of Opus Small and Aptus Drawdown.

Diversification Opportunities for Opus Small and Aptus Drawdown

0.9

Correlation Coefficient

Opus Small  Aptus Drawdown

Almost no diversification

The 3 months correlation between Opus and Aptus is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Opus Small Cap and Aptus Drawdown Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aptus Drawdown Managed 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 Aptus Drawdown. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aptus Drawdown Managed has no effect on the direction of Opus Small i.e., Opus Small and Aptus Drawdown go up and down completely randomly.

Pair Corralation between Opus Small and Aptus Drawdown

Given the investment horizon of 90 days Opus Small Cap is expected to generate 1.03 times more return on investment than Aptus Drawdown. However, Opus Small is 1.03 times more volatile than Aptus Drawdown Managed. It trades about -0.08 of its potential returns per unit of risk. Aptus Drawdown Managed is currently generating about -0.09 per unit of risk. If you would invest  3,732  in Opus Small Cap on December 26, 2024 and sell it today you would lose (183.00) from holding Opus Small Cap or give up 4.9% of portfolio value over 90 days.

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

Opus Small Cap  vs.  Aptus Drawdown Managed

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.

Aptus Drawdown Managed

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aptus Drawdown Managed has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Aptus Drawdown is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Opus Small and Aptus Drawdown

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

The idea behind Opus Small Cap and Aptus Drawdown Managed 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.