Correlation Between Live Oak and New Perspective
Can any of the company-specific risk be diversified away by investing in both Live Oak 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 Live Oak and New Perspective 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 New Perspective Fund, you can compare the effects of market volatilities on Live Oak 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 Live Oak with a short position of New Perspective. Check out your portfolio center. Please also check ongoing floating volatility patterns of Live Oak and New Perspective.
Diversification Opportunities for Live Oak and New Perspective
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Live and New is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Live Oak Health and New Perspective Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Perspective 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 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 has no effect on the direction of Live Oak i.e., Live Oak and New Perspective go up and down completely randomly.
Pair Corralation between Live Oak and New Perspective
Assuming the 90 days horizon Live Oak is expected to generate 11.4 times less return on investment than New Perspective. But when comparing it to its historical volatility, Live Oak Health is 1.11 times less risky than New Perspective. It trades about 0.01 of its potential returns per unit of risk. New Perspective Fund is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 4,644 in New Perspective Fund on September 5, 2024 and sell it today you would earn a total of 1,835 from holding New Perspective Fund or generate 39.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Live Oak Health vs. New Perspective Fund
Performance |
| Timeline |
| Live Oak Health |
| New Perspective |
Live Oak and New Perspective Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Live Oak and New Perspective
The main advantage of trading using opposite Live Oak and New Perspective positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Live Oak 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.| Live Oak vs. Black Oak Emerging | Live Oak vs. Pin Oak Equity | Live Oak vs. Red Oak Technology | Live Oak vs. White Oak Select |
| New Perspective vs. Live Oak Health | New Perspective vs. Tekla Healthcare Opportunities | New Perspective vs. Alger Health Sciences | New Perspective vs. Blackrock Health Sciences |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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