Correlation Between Overlay Shares and ClearShares Ultra

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

By analyzing existing cross correlation between Overlay Shares Large and ClearShares Ultra Short Maturity, you can compare the effects of market volatilities on Overlay Shares and ClearShares Ultra 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 Overlay Shares with a short position of ClearShares Ultra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Overlay Shares and ClearShares Ultra.

Diversification Opportunities for Overlay Shares and ClearShares Ultra

0.87

Correlation Coefficient

Overlay Shares  ClearShares Ultra

Very poor diversification

The 3 months correlation between Overlay and ClearShares is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Overlay Shares Large and ClearShares Ultra Short Maturi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ClearShares Ultra Short and Overlay Shares 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 Overlay Shares Large are associated (or correlated) with ClearShares Ultra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ClearShares Ultra Short has no effect on the direction of Overlay Shares i.e., Overlay Shares and ClearShares Ultra go up and down completely randomly.

Pair Corralation between Overlay Shares and ClearShares Ultra

Considering the 90-day investment horizon Overlay Shares Large is expected to generate 50.86 times more return on investment than ClearShares Ultra. However, Overlay Shares is 50.86 times more volatile than ClearShares Ultra Short Maturity. It trades about 0.2 of its potential returns per unit of risk. ClearShares Ultra Short Maturity is currently generating about 1.12 per unit of risk. If you would invest  4,370  in Overlay Shares Large on September 5, 2024 and sell it today you would earn a total of  498.00  from holding Overlay Shares Large or generate 11.4% return on investment over 90 days.

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

Overlay Shares Large  vs.  ClearShares Ultra Short Maturi

Overlay Shares Large

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Overlay Shares Large are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Overlay Shares may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ClearShares Ultra Short

Risk-Adjusted Performance

88 of 100

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in ClearShares Ultra Short Maturity are ranked lower than 88 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, ClearShares Ultra is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Overlay Shares and ClearShares Ultra

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

The idea behind Overlay Shares Large and ClearShares Ultra Short Maturity 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.