Correlation Between OKB and New Perspective

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Can any of the company-specific risk be diversified away by investing in both OKB and New Perspective 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 OKB and New Perspective into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between OKB and New Perspective Fund, you can compare the effects of market volatilities on OKB and New Perspective 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 OKB with a short position of New Perspective. Check out your portfolio center. Please also check ongoing floating volatility patterns of OKB and New Perspective.

Diversification Opportunities for OKB and New Perspective

0.55
  Correlation Coefficient

Very weak diversification

The 3 months correlation between OKB and New is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding OKB and NEW PERSPECTIVE FUND in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Perspective Fund and OKB 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 OKB are associated (or correlated) with New Perspective. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Perspective Fund has no effect on the direction of OKB i.e., OKB and New Perspective go up and down completely randomly.

Pair Corralation between OKB and New Perspective

Assuming the 90 days trading horizon OKB is expected to generate 8.12 times more return on investment than New Perspective. However, OKB is 8.12 times more volatile than New Perspective Fund. It trades about 0.19 of its potential returns per unit of risk. New Perspective Fund is currently generating about 0.18 per unit of risk. If you would invest  5,229  in OKB on December 29, 2023 and sell it today you would earn a total of  1,119  from holding OKB or generate 21.4% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

OKB  vs.  NEW PERSPECTIVE FUND

 Performance 
       Timeline  
OKB 

Risk-Adjusted Performance

6 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in OKB are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, OKB exhibited solid returns over the last few months and may actually be approaching a breakup point.
New Perspective Fund 

Risk-Adjusted Performance

15 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in New Perspective Fund are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, New Perspective may actually be approaching a critical reversion point that can send shares even higher in April 2024.

OKB and New Perspective Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with OKB and New Perspective

The main advantage of trading using opposite OKB and New Perspective positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OKB position performs unexpectedly, New Perspective 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 New Perspective will offset losses from the drop in New Perspective's long position.
The idea behind OKB and New Perspective Fund 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.

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