Correlation Between Live Oak and Small Company
Can any of the company-specific risk be diversified away by investing in both Live Oak and Small Company 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 Small Company 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 Small Pany Value, you can compare the effects of market volatilities on Live Oak and Small Company 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 Small Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Live Oak and Small Company.
Diversification Opportunities for Live Oak and Small Company
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between LIVE and Small is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Live Oak Health and Small Pany Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Pany Value 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 Small Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Pany Value has no effect on the direction of Live Oak i.e., Live Oak and Small Company go up and down completely randomly.
Pair Corralation between Live Oak and Small Company
Assuming the 90 days horizon Live Oak is expected to generate 2.77 times less return on investment than Small Company. But when comparing it to its historical volatility, Live Oak Health is 1.79 times less risky than Small Company. It trades about 0.06 of its potential returns per unit of risk. Small Pany Value is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 3,766 in Small Pany Value on August 26, 2024 and sell it today you would earn a total of 599.00 from holding Small Pany Value or generate 15.91% 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. Small Pany Value
Performance |
| Timeline |
| Live Oak Health |
| Small Pany Value |
Live Oak and Small Company Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Live Oak and Small Company
The main advantage of trading using opposite Live Oak and Small Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Live Oak position performs unexpectedly, Small Company 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 Small Company will offset losses from the drop in Small Company'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 |
| Small Company vs. Alger Health Sciences | Small Company vs. Blackrock Health Sciences | Small Company vs. Tekla Healthcare Opportunities | Small Company vs. Live Oak Health |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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