Correlation Between Live Oak and Metropolitan West
Can any of the company-specific risk be diversified away by investing in both Live Oak and Metropolitan West 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 Metropolitan West 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 Metropolitan West Total, you can compare the effects of market volatilities on Live Oak and Metropolitan West 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 Metropolitan West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Live Oak and Metropolitan West.
Diversification Opportunities for Live Oak and Metropolitan West
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Live and Metropolitan is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Live Oak Health and Metropolitan West Total in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metropolitan West Total 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 Metropolitan West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metropolitan West Total has no effect on the direction of Live Oak i.e., Live Oak and Metropolitan West go up and down completely randomly.
Pair Corralation between Live Oak and Metropolitan West
Assuming the 90 days horizon Live Oak is expected to generate 1.47 times less return on investment than Metropolitan West. In addition to that, Live Oak is 2.23 times more volatile than Metropolitan West Total. It trades about 0.04 of its total potential returns per unit of risk. Metropolitan West Total is currently generating about 0.12 per unit of volatility. If you would invest 903.00 in Metropolitan West Total on September 4, 2024 and sell it today you would earn a total of 9.00 from holding Metropolitan West Total or generate 1.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Live Oak Health vs. Metropolitan West Total
Performance |
| Timeline |
| Live Oak Health |
| Metropolitan West Total |
Live Oak and Metropolitan West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Live Oak and Metropolitan West
The main advantage of trading using opposite Live Oak and Metropolitan West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Live Oak position performs unexpectedly, Metropolitan West 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 Metropolitan West will offset losses from the drop in Metropolitan West'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 |
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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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