diversifiable risk of combining Vanguard Small-cap and Oppenheimer Main into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Small Cap Index and Oppenheimer Main Street, you can compare the effects of market volatilities on Vanguard Small-cap and Oppenheimer Main 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 Vanguard Small-cap with a short position of Oppenheimer Main. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small-cap and Oppenheimer Main.
Diversification Opportunities for Vanguard Small-cap and Oppenheimer Main
Pair Corralation between Vanguard Small-cap and Oppenheimer Main
Assuming the 90 days horizon Vanguard Small Cap Index is expected to generate 0.91 times more return on investment than Oppenheimer Main. However, Vanguard Small Cap Index is 1.1 times less risky than Oppenheimer Main. It trades about 0.07 of its potential returns per unit of risk. Oppenheimer Main Street is currently generating about 0.04 per unit of risk. If you would invest 10,055 in Vanguard Small Cap Index on November 24, 2023 and sell it today you would earn a total of 181.00 from holding Vanguard Small Cap Index or generate 1.8% return on investment over 90 days.
VANGUARD SMALL-CAP INDEX vs. Oppenheimer Main Street
Vanguard Small-cap and Oppenheimer Main Volatility Contrast
Pair Trading with Vanguard Small-cap and Oppenheimer MainThe main advantage of trading using opposite Vanguard Small-cap and Oppenheimer Main positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small-cap position performs unexpectedly, Oppenheimer Main 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 Oppenheimer Main will offset losses from the drop in Oppenheimer Main's long position. The idea behind Vanguard Small Cap Index and Oppenheimer Main Street 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.
Check out your portfolio center.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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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