Correlation Between Live Oak and Health Care
Can any of the company-specific risk be diversified away by investing in both Live Oak and Health Care 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 Health Care 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 Health Care Fund, you can compare the effects of market volatilities on Live Oak and Health Care 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 Health Care. Check out your portfolio center. Please also check ongoing floating volatility patterns of Live Oak and Health Care.
Diversification Opportunities for Live Oak and Health Care
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Live and Health is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Live Oak Health and Health Care Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Health Care 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 Health Care. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Health Care Fund has no effect on the direction of Live Oak i.e., Live Oak and Health Care go up and down completely randomly.
Pair Corralation between Live Oak and Health Care
Assuming the 90 days horizon Live Oak Health is expected to generate 1.03 times more return on investment than Health Care. However, Live Oak is 1.03 times more volatile than Health Care Fund. It trades about -0.05 of its potential returns per unit of risk. Health Care Fund is currently generating about -0.1 per unit of risk. If you would invest 2,241 in Live Oak Health on August 29, 2024 and sell it today you would lose (39.00) from holding Live Oak Health or give up 1.74% 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. Health Care Fund
Performance |
| Timeline |
| Live Oak Health |
| Health Care Fund |
Live Oak and Health Care Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Live Oak and Health Care
The main advantage of trading using opposite Live Oak and Health Care positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Live Oak position performs unexpectedly, Health Care 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 Health Care will offset losses from the drop in Health Care's long position.| Live Oak vs. Fidelity Advisor Technology | Live Oak vs. Fidelity Advisor Biotechnology | Live Oak vs. Fidelity Advisor Financial | Live Oak vs. Fidelity Advisor Utilities |
| Health Care vs. Fidelity Advisor Technology | Health Care vs. Fidelity Advisor Biotechnology | Health Care vs. Fidelity Advisor Financial | Health Care vs. Fidelity Advisor Utilities |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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