Correlation Between OShares Quality and OShares Global

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

Diversification Opportunities for OShares Quality and OShares Global

0.7

Correlation Coefficient

OShares Quality  OShares Global

Poor diversification

The 3 months correlation between OShares and OShares is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding OShares Quality Dividend and OShares Global Internet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OShares Global Internet 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 Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OShares Global Internet has no effect on the direction of OShares Quality i.e., OShares Quality and OShares Global go up and down completely randomly.

Pair Corralation between OShares Quality and OShares Global

Given the investment horizon of 90 days OShares Quality is expected to generate 2.04 times less return on investment than OShares Global. But when comparing it to its historical volatility, OShares Quality Dividend is 2.12 times less risky than OShares Global. It trades about 0.09 of its potential returns per unit of risk. OShares Global Internet is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,820  in OShares Global Internet on September 26, 2024 and sell it today you would earn a total of  1,898  from holding OShares Global Internet or generate 67.3% return on investment over 90 days.

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

OShares Quality Dividend  vs.  OShares Global Internet

OShares Quality Dividend

Risk-Adjusted Performance

0 of 100

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 Global Internet

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in OShares Global Internet are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward indicators, OShares Global reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with OShares Quality and OShares Global

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

The idea behind OShares Quality Dividend and OShares Global Internet 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.