Correlation Between Swan Defined and Omni Small

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

By analyzing existing cross correlation between Swan Defined Risk and Omni Small Cap Value, you can compare the effects of market volatilities on Swan Defined and Omni Small 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 Swan Defined with a short position of Omni Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Swan Defined and Omni Small.

Diversification Opportunities for Swan Defined and Omni Small

0.39

Correlation Coefficient

Swan Defined  Omni Small

Weak diversification

The 3 months correlation between Swan and Omni is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Swan Defined Risk and Omni Small Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Omni Small Cap and Swan Defined 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 Swan Defined Risk are associated (or correlated) with Omni Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Omni Small Cap has no effect on the direction of Swan Defined i.e., Swan Defined and Omni Small go up and down completely randomly.

Pair Corralation between Swan Defined and Omni Small

Assuming the 90 days horizon Swan Defined Risk is expected to under-perform the Omni Small. But the mutual fund apears to be less risky and, when comparing its historical volatility, Swan Defined Risk is 1.07 times less risky than Omni Small. The mutual fund trades about -0.13 of its potential returns per unit of risk. The Omni Small Cap Value is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  1,810  in Omni Small Cap Value on December 20, 2024 and sell it today you would lose (135.00) from holding Omni Small Cap Value or give up 7.46% of portfolio value over 90 days.

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

Swan Defined Risk  vs.  Omni Small Cap Value

Swan Defined Risk

Risk-Adjusted Performance

Very Weak

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

Omni Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Omni Small Cap Value 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 Swan Defined and Omni Small

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

The idea behind Swan Defined Risk and Omni Small Cap Value 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.