Correlation Between Oppenheimer Strategic and Oppenheimer Discovery

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

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

Diversification Opportunities for Oppenheimer Strategic and Oppenheimer Discovery

-0.6

Correlation Coefficient

Oppenheimer Strategic  Oppenheimer Discovery

Excellent diversification

The 3 months correlation between Oppenheimer and Oppenheimer is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Oppenheimer Strategic Income and Oppenheimer Discovery Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oppenheimer Discovery Mid and Oppenheimer Strategic 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 Strategic Income are associated (or correlated) with Oppenheimer Discovery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oppenheimer Discovery Mid has no effect on the direction of Oppenheimer Strategic i.e., Oppenheimer Strategic and Oppenheimer Discovery go up and down completely randomly.

Pair Corralation between Oppenheimer Strategic and Oppenheimer Discovery

Assuming the 90 days horizon Oppenheimer Strategic Income is expected to generate 0.2 times more return on investment than Oppenheimer Discovery. However, Oppenheimer Strategic Income is 4.95 times less risky than Oppenheimer Discovery. It trades about 0.18 of its potential returns per unit of risk. Oppenheimer Discovery Mid is currently generating about -0.1 per unit of risk. If you would invest  303.00  in Oppenheimer Strategic Income on December 26, 2024 and sell it today you would earn a total of  11.00  from holding Oppenheimer Strategic Income or generate 3.63% return on investment over 90 days.

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

Oppenheimer Strategic Income  vs.  Oppenheimer Discovery Mid

Oppenheimer Strategic

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Oppenheimer Strategic Income are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Oppenheimer Strategic is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Oppenheimer Discovery Mid

Risk-Adjusted Performance

Very Weak

Over the last 90 days Oppenheimer Discovery Mid has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Oppenheimer Strategic and Oppenheimer Discovery

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

The idea behind Oppenheimer Strategic Income and Oppenheimer Discovery Mid 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.