Correlation Between Black Oak and Western Assets
Can any of the company-specific risk be diversified away by investing in both Black Oak and Western Assets 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 Black Oak and Western Assets into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Black Oak Emerging and Western Assets Emerging, you can compare the effects of market volatilities on Black Oak and Western Assets 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 Black Oak with a short position of Western Assets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Black Oak and Western Assets.
Diversification Opportunities for Black Oak and Western Assets
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Black and Western is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Black Oak Emerging and Western Assets Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Assets Emerging and Black Oak 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 Black Oak Emerging are associated (or correlated) with Western Assets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Assets Emerging has no effect on the direction of Black Oak i.e., Black Oak and Western Assets go up and down completely randomly.
Pair Corralation between Black Oak and Western Assets
Assuming the 90 days horizon Black Oak Emerging is expected to generate 3.67 times more return on investment than Western Assets. However, Black Oak is 3.67 times more volatile than Western Assets Emerging. It trades about 0.18 of its potential returns per unit of risk. Western Assets Emerging is currently generating about 0.15 per unit of risk. If you would invest 725.00 in Black Oak Emerging on November 3, 2024 and sell it today you would earn a total of 30.00 from holding Black Oak Emerging or generate 4.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Black Oak Emerging vs. Western Assets Emerging
Performance |
| Timeline |
| Black Oak Emerging |
| Western Assets Emerging |
Black Oak and Western Assets Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Black Oak and Western Assets
The main advantage of trading using opposite Black Oak and Western Assets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Black Oak position performs unexpectedly, Western Assets 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 Western Assets will offset losses from the drop in Western Assets' long position.| Black Oak vs. Red Oak Technology | Black Oak vs. Pin Oak Equity | Black Oak vs. White Oak Select | Black Oak vs. Live Oak Health |
| Western Assets vs. Schwab Small Cap Index | Western Assets vs. Tax Managed Mid Small | Western Assets vs. Lord Abbett Diversified | Western Assets vs. Lord Abbett Diversified |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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