Correlation Between OShares Quality and OShares Europe

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

By analyzing existing cross correlation between OShares Quality Dividend and OShares Europe Quality, you can compare the effects of market volatilities on OShares Quality and OShares Europe 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 OShares Quality with a short position of OShares Europe. Check out your portfolio center. Please also check ongoing floating volatility patterns of OShares Quality and OShares Europe.

Diversification Opportunities for OShares Quality and OShares Europe

0.28

Correlation Coefficient

OShares Quality  OShares Europe

Modest diversification

The 3 months correlation between OShares and OShares is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding OShares Quality Dividend and OShares Europe Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OShares Europe Quality and OShares Quality 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 OShares Quality Dividend are associated (or correlated) with OShares Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OShares Europe Quality has no effect on the direction of OShares Quality i.e., OShares Quality and OShares Europe go up and down completely randomly.

Pair Corralation between OShares Quality and OShares Europe

Given the investment horizon of 90 days OShares Quality Dividend is expected to under-perform the OShares Europe. But the etf apears to be less risky and, when comparing its historical volatility, OShares Quality Dividend is 1.24 times less risky than OShares Europe. The etf trades about -0.01 of its potential returns per unit of risk. The OShares Europe Quality is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  2,738  in OShares Europe Quality on December 29, 2024 and sell it today you would earn a total of  298.00  from holding OShares Europe Quality or generate 10.88% return on investment over 90 days.

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

OShares Quality Dividend  vs.  OShares Europe Quality

OShares Quality Dividend

Risk-Adjusted Performance

Very Weak

Over the last 90 days OShares Quality Dividend has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, OShares Quality is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

OShares Europe Quality

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in OShares Europe Quality are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, OShares Europe may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with OShares Quality and OShares Europe

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

The idea behind OShares Quality Dividend and OShares Europe Quality 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.