Correlation Between Live Oak and Black Oak
Can any of the company-specific risk be diversified away by investing in both Live Oak and Black 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 Live Oak and Black Oak into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Live Oak Health and Black Oak Emerging, you can compare the effects of market volatilities on Live Oak and Black 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 Live Oak with a short position of Black Oak. Check out your portfolio center. Please also check ongoing floating volatility patterns of Live Oak and Black Oak.
Diversification Opportunities for Live Oak and Black Oak
Very poor diversification
The 3 months correlation between Live and Black is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Live Oak Health and Black Oak Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Oak Emerging and Live 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 Live Oak Health are associated (or correlated) with Black Oak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Black Oak Emerging has no effect on the direction of Live Oak i.e., Live Oak and Black Oak go up and down completely randomly.
Pair Corralation between Live Oak and Black Oak
Assuming the 90 days horizon Live Oak Health is expected to generate 0.63 times more return on investment than Black Oak. However, Live Oak Health is 1.6 times less risky than Black Oak. It trades about 0.43 of its potential returns per unit of risk. Black Oak Emerging is currently generating about 0.18 per unit of risk. If you would invest 2,010 in Live Oak Health on November 2, 2024 and sell it today you would earn a total of 129.00 from holding Live Oak Health or generate 6.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Live Oak Health vs. Black Oak Emerging
Performance |
| Timeline |
| Live Oak Health |
| Black Oak Emerging |
Live Oak and Black Oak Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Live Oak and Black Oak
The main advantage of trading using opposite Live Oak and Black Oak positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Live Oak position performs unexpectedly, Black 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 Black Oak will offset losses from the drop in Black Oak's long position.| Live Oak vs. Black Oak Emerging | Live Oak vs. Pin Oak Equity | Live Oak vs. Red Oak Technology | Live Oak vs. White Oak Select |
| Black Oak vs. Red Oak Technology | Black Oak vs. Pin Oak Equity | Black Oak vs. White Oak Select | Black Oak vs. Live Oak Health |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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