Correlation Between Live Oak and Prudential Health
Can any of the company-specific risk be diversified away by investing in both Live Oak and Prudential Health 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 Prudential Health 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 Prudential Health Sciences, you can compare the effects of market volatilities on Live Oak and Prudential Health 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 Prudential Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Live Oak and Prudential Health.
Diversification Opportunities for Live Oak and Prudential Health
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Live and Prudential is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Live Oak Health and Prudential Health Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Health 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 Prudential Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Health has no effect on the direction of Live Oak i.e., Live Oak and Prudential Health go up and down completely randomly.
Pair Corralation between Live Oak and Prudential Health
Assuming the 90 days horizon Live Oak Health is expected to generate 0.42 times more return on investment than Prudential Health. However, Live Oak Health is 2.36 times less risky than Prudential Health. It trades about -0.09 of its potential returns per unit of risk. Prudential Health Sciences is currently generating about -0.17 per unit of risk. If you would invest 2,187 in Live Oak Health on October 22, 2024 and sell it today you would lose (104.00) from holding Live Oak Health or give up 4.76% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Live Oak Health vs. Prudential Health Sciences
Performance |
| Timeline |
| Live Oak Health |
| Prudential Health |
Live Oak and Prudential Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Live Oak and Prudential Health
The main advantage of trading using opposite Live Oak and Prudential Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Live Oak position performs unexpectedly, Prudential Health 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 Prudential Health will offset losses from the drop in Prudential Health'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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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