Correlation Between Gotham Defensive and Red Oak
Can any of the company-specific risk be diversified away by investing in both Gotham Defensive and Red Oak 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 Gotham Defensive and Red Oak into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gotham Defensive Long and Red Oak Technology, you can compare the effects of market volatilities on Gotham Defensive and Red Oak 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 Gotham Defensive with a short position of Red Oak. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gotham Defensive and Red Oak.
Diversification Opportunities for Gotham Defensive and Red Oak
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Gotham and Red is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Gotham Defensive Long and Red Oak Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red Oak Technology and Gotham Defensive 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 Gotham Defensive Long are associated (or correlated) with Red Oak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red Oak Technology has no effect on the direction of Gotham Defensive i.e., Gotham Defensive and Red Oak go up and down completely randomly.
Pair Corralation between Gotham Defensive and Red Oak
Assuming the 90 days horizon Gotham Defensive Long is expected to under-perform the Red Oak. But the mutual fund apears to be less risky and, when comparing its historical volatility, Gotham Defensive Long is 1.33 times less risky than Red Oak. The mutual fund trades about -0.14 of its potential returns per unit of risk. The Red Oak Technology is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 4,943 in Red Oak Technology on September 14, 2024 and sell it today you would earn a total of 69.00 from holding Red Oak Technology or generate 1.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gotham Defensive Long vs. Red Oak Technology
Performance |
| Timeline |
| Gotham Defensive Long |
| Red Oak Technology |
Gotham Defensive and Red Oak Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gotham Defensive and Red Oak
The main advantage of trading using opposite Gotham Defensive and Red Oak positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gotham Defensive position performs unexpectedly, Red Oak 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 Red Oak will offset losses from the drop in Red Oak's long position.| Gotham Defensive vs. Red Oak Technology | Gotham Defensive vs. Iaadx | Gotham Defensive vs. Ab Value Fund | Gotham Defensive vs. Scharf Global Opportunity |
| Red Oak vs. Pin Oak Equity | Red Oak vs. White Oak Select | Red Oak vs. Black Oak Emerging | Red Oak vs. Berkshire Focus |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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