Correlation Between Live Oak and Government Securities
Can any of the company-specific risk be diversified away by investing in both Live Oak and Government Securities 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 Government Securities 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 Government Securities Fund, you can compare the effects of market volatilities on Live Oak and Government Securities 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 Government Securities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Live Oak and Government Securities.
Diversification Opportunities for Live Oak and Government Securities
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Live and Government is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Live Oak Health and Government Securities Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Government Securities 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 Government Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Government Securities has no effect on the direction of Live Oak i.e., Live Oak and Government Securities go up and down completely randomly.
Pair Corralation between Live Oak and Government Securities
Assuming the 90 days horizon Live Oak Health is expected to generate 3.34 times more return on investment than Government Securities. However, Live Oak is 3.34 times more volatile than Government Securities Fund. It trades about 0.08 of its potential returns per unit of risk. Government Securities Fund is currently generating about 0.05 per unit of risk. If you would invest 2,166 in Live Oak Health on August 29, 2024 and sell it today you would earn a total of 36.00 from holding Live Oak Health or generate 1.66% 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. Government Securities Fund
Performance |
| Timeline |
| Live Oak Health |
| Government Securities |
Live Oak and Government Securities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Live Oak and Government Securities
The main advantage of trading using opposite Live Oak and Government Securities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Live Oak position performs unexpectedly, Government Securities 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 Government Securities will offset losses from the drop in Government Securities' 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 |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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