Correlation Between Live Oak and Blue Chip
Can any of the company-specific risk be diversified away by investing in both Live Oak and Blue Chip 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 Blue Chip 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 Blue Chip Fund, you can compare the effects of market volatilities on Live Oak and Blue Chip 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 Blue Chip. Check out your portfolio center. Please also check ongoing floating volatility patterns of Live Oak and Blue Chip.
Diversification Opportunities for Live Oak and Blue Chip
Poor diversification
The 3 months correlation between Live and Blue is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Live Oak Health and Blue Chip Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Chip Fund 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 Blue Chip. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Chip Fund has no effect on the direction of Live Oak i.e., Live Oak and Blue Chip go up and down completely randomly.
Pair Corralation between Live Oak and Blue Chip
Assuming the 90 days horizon Live Oak Health is expected to under-perform the Blue Chip. But the mutual fund apears to be less risky and, when comparing its historical volatility, Live Oak Health is 1.34 times less risky than Blue Chip. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Blue Chip Fund is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2,994 in Blue Chip Fund on January 13, 2025 and sell it today you would earn a total of 1,091 from holding Blue Chip Fund or generate 36.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Live Oak Health vs. Blue Chip Fund
Performance |
| Timeline |
| Live Oak Health |
| Blue Chip Fund |
Live Oak and Blue Chip Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Live Oak and Blue Chip
The main advantage of trading using opposite Live Oak and Blue Chip positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Live Oak position performs unexpectedly, Blue Chip 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 Blue Chip will offset losses from the drop in Blue Chip'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 |
| Blue Chip vs. Strategic Asset Management | Blue Chip vs. Strategic Asset Management | Blue Chip vs. Strategic Asset Management | Blue Chip vs. Strategic Asset Management |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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