Correlation Between Otter Creek and Calamos Market

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

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

Diversification Opportunities for Otter Creek and Calamos Market

0.03

Correlation Coefficient

Otter Creek  Calamos Market

Significant diversification

The 3 months correlation between Otter and Calamos is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Otter Creek Longshort and Calamos Market Neutral in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calamos Market Neutral and Otter Creek 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 Otter Creek Longshort are associated (or correlated) with Calamos Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calamos Market Neutral has no effect on the direction of Otter Creek i.e., Otter Creek and Calamos Market go up and down completely randomly.

Pair Corralation between Otter Creek and Calamos Market

Assuming the 90 days horizon Otter Creek Longshort is expected to under-perform the Calamos Market. In addition to that, Otter Creek is 3.63 times more volatile than Calamos Market Neutral. It trades about -0.04 of its total potential returns per unit of risk. Calamos Market Neutral is currently generating about 0.11 per unit of volatility. If you would invest  1,510  in Calamos Market Neutral on December 20, 2024 and sell it today you would earn a total of  16.00  from holding Calamos Market Neutral or generate 1.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Otter Creek Longshort  vs.  Calamos Market Neutral

Otter Creek Longshort

Risk-Adjusted Performance

Very Weak

Over the last 90 days Otter Creek Longshort has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Otter Creek is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Calamos Market Neutral

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Calamos Market Neutral are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Calamos Market is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Otter Creek and Calamos Market

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

The idea behind Otter Creek Longshort and Calamos Market Neutral 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.