Correlation Between Omni Small-cap and Gavekal Kl

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

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

Diversification Opportunities for Omni Small-cap and Gavekal Kl

0.61

Correlation Coefficient

Omni Small-cap  Gavekal Kl

Poor diversification

The 3 months correlation between Omni and Gavekal is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Omni Small Cap Value and Gavekal Kl Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gavekal Kl Allocation and Omni Small-cap 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 Omni Small Cap Value are associated (or correlated) with Gavekal Kl. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gavekal Kl Allocation has no effect on the direction of Omni Small-cap i.e., Omni Small-cap and Gavekal Kl go up and down completely randomly.

Pair Corralation between Omni Small-cap and Gavekal Kl

Assuming the 90 days horizon Omni Small Cap Value is expected to generate 4.26 times more return on investment than Gavekal Kl. However, Omni Small-cap is 4.26 times more volatile than Gavekal Kl Allocation. It trades about 0.04 of its potential returns per unit of risk. Gavekal Kl Allocation is currently generating about 0.09 per unit of risk. If you would invest  1,846  in Omni Small Cap Value on March 4, 2024 and sell it today you would earn a total of  48.00  from holding Omni Small Cap Value or generate 2.6% return on investment over 90 days.

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

Omni Small Cap Value  vs.  Gavekal Kl Allocation

Omni Small Cap

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Omni Small Cap Value are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Omni Small-cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Gavekal Kl Allocation

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gavekal Kl Allocation are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Gavekal Kl is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Omni Small-cap and Gavekal Kl

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

The idea behind Omni Small Cap Value and Gavekal Kl Allocation 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.