Correlation Between Oppenheimer Main and Vanguard Small-cap

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

Diversification Opportunities for Oppenheimer Main and Vanguard Small-cap

0.99
  Correlation Coefficient

No risk reduction

The 3 months correlation between Oppenheimer and Vanguard is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Oppenheimer Main Street and VANGUARD SMALL-CAP INDEX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Small-cap Index and Oppenheimer Main 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 Oppenheimer Main Street are associated (or correlated) with Vanguard Small-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Small-cap Index has no effect on the direction of Oppenheimer Main i.e., Oppenheimer Main and Vanguard Small-cap go up and down completely randomly.

Pair Corralation between Oppenheimer Main and Vanguard Small-cap

Assuming the 90 days horizon Oppenheimer Main is expected to generate 1.3 times less return on investment than Vanguard Small-cap. In addition to that, Oppenheimer Main is 1.1 times more volatile than Vanguard Small Cap Index. It trades about 0.06 of its total potential returns per unit of risk. Vanguard Small Cap Index is currently generating about 0.09 per unit of volatility. If you would invest  10,152  in Vanguard Small Cap Index on December 2, 2023 and sell it today you would earn a total of  373.00  from holding Vanguard Small Cap Index or generate 3.67% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Oppenheimer Main Street  vs.  VANGUARD SMALL-CAP INDEX

 Performance 
       Timeline  
Oppenheimer Main Street 

Risk-Adjusted Performance

10 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Oppenheimer Main Street are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Oppenheimer Main may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Vanguard Small-cap Index 

Risk-Adjusted Performance

10 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Small Cap Index are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Small-cap may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Oppenheimer Main and Vanguard Small-cap Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Oppenheimer Main and Vanguard Small-cap

The main advantage of trading using opposite Oppenheimer Main and Vanguard Small-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oppenheimer Main position performs unexpectedly, Vanguard Small-cap 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 Vanguard Small-cap will offset losses from the drop in Vanguard Small-cap's long position.
The idea behind Oppenheimer Main Street and Vanguard Small Cap Index 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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