Correlation Between Opus Small and Invesco SP

Can any of the company-specific risk be diversified away by investing in both Opus Small and Invesco SP 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 Invesco SP 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 Invesco SP 500, you can compare the effects of market volatilities on Opus Small and Invesco SP 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 Invesco SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Opus Small and Invesco SP.

Diversification Opportunities for Opus Small and Invesco SP

0.33

Correlation Coefficient

Opus Small  Invesco SP

Weak diversification

The 3 months correlation between Opus and Invesco is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Opus Small Cap and Invesco SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP 500 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 Invesco SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP 500 has no effect on the direction of Opus Small i.e., Opus Small and Invesco SP go up and down completely randomly.

Pair Corralation between Opus Small and Invesco SP

Given the investment horizon of 90 days Opus Small Cap is expected to under-perform the Invesco SP. In addition to that, Opus Small is 1.3 times more volatile than Invesco SP 500. It trades about -0.45 of its total potential returns per unit of risk. Invesco SP 500 is currently generating about -0.1 per unit of volatility. If you would invest  3,860  in Invesco SP 500 on September 30, 2024 and sell it today you would lose (62.00) from holding Invesco SP 500 or give up 1.61% of portfolio value over 90 days.

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

Opus Small Cap  vs.  Invesco SP 500

Opus Small Cap

Risk-Adjusted Performance

0 of 100

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

Invesco SP 500

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Invesco SP is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Opus Small and Invesco SP

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

The idea behind Opus Small Cap and Invesco SP 500 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.