Correlation Between PRA and Oaktree Specialty
Can any of the company-specific risk be diversified away by investing in both PRA and Oaktree Specialty 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 PRA and Oaktree Specialty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PRA Group and Oaktree Specialty Lending, you can compare the effects of market volatilities on PRA and Oaktree Specialty 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 PRA with a short position of Oaktree Specialty. Check out your portfolio center. Please also check ongoing floating volatility patterns of PRA and Oaktree Specialty.
Diversification Opportunities for PRA and Oaktree Specialty
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between PRA and Oaktree is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding PRA Group and Oaktree Specialty Lending in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oaktree Specialty Lending and PRA 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 PRA Group are associated (or correlated) with Oaktree Specialty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oaktree Specialty Lending has no effect on the direction of PRA i.e., PRA and Oaktree Specialty go up and down completely randomly.
Pair Corralation between PRA and Oaktree Specialty
Given the investment horizon of 90 days PRA Group is expected to generate 3.28 times more return on investment than Oaktree Specialty. However, PRA is 3.28 times more volatile than Oaktree Specialty Lending. It trades about 0.15 of its potential returns per unit of risk. Oaktree Specialty Lending is currently generating about 0.02 per unit of risk. If you would invest 1,888 in PRA Group on August 30, 2024 and sell it today you would earn a total of 259.00 from holding PRA Group or generate 13.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PRA Group vs. Oaktree Specialty Lending
Performance |
| Timeline |
| PRA Group |
| Oaktree Specialty Lending |
PRA and Oaktree Specialty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PRA and Oaktree Specialty
The main advantage of trading using opposite PRA and Oaktree Specialty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PRA position performs unexpectedly, Oaktree Specialty 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 Oaktree Specialty will offset losses from the drop in Oaktree Specialty's long position.The idea behind PRA Group and Oaktree Specialty Lending pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Oaktree Specialty vs. Barings BDC | Oaktree Specialty vs. OneMain Holdings | Oaktree Specialty vs. Runway Growth Finance | Oaktree Specialty vs. Ally Financial |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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