Correlation Between Rock Oak and River Oak
Can any of the company-specific risk be diversified away by investing in both Rock Oak and River Oak 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 Rock Oak and River Oak into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rock Oak E and River Oak Discovery, you can compare the effects of market volatilities on Rock Oak and River Oak 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 Rock Oak with a short position of River Oak. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rock Oak and River Oak.
Diversification Opportunities for Rock Oak and River Oak
Almost no diversification
The 3 months correlation between Rock and River is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Rock Oak E and River Oak Discovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on River Oak Discovery and Rock 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 Rock Oak E are associated (or correlated) with River Oak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of River Oak Discovery has no effect on the direction of Rock Oak i.e., Rock Oak and River Oak go up and down completely randomly.
Pair Corralation between Rock Oak and River Oak
Assuming the 90 days horizon Rock Oak E is expected to generate 0.67 times more return on investment than River Oak. However, Rock Oak E is 1.48 times less risky than River Oak. It trades about 0.12 of its potential returns per unit of risk. River Oak Discovery is currently generating about 0.06 per unit of risk. If you would invest 1,529 in Rock Oak E on September 12, 2024 and sell it today you would earn a total of 520.00 from holding Rock Oak E or generate 34.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rock Oak E vs. River Oak Discovery
Performance |
| Timeline |
| Rock Oak E |
| River Oak Discovery |
Rock Oak and River Oak Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rock Oak and River Oak
The main advantage of trading using opposite Rock Oak and River Oak positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rock Oak position performs unexpectedly, River Oak 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 River Oak will offset losses from the drop in River Oak's long position.| Rock Oak vs. Live Oak Health | Rock Oak vs. River Oak Discovery | Rock Oak vs. Black Oak Emerging | Rock Oak vs. Pin Oak Equity |
| River Oak vs. Rock Oak E | River Oak vs. Live Oak Health | River Oak vs. Black Oak Emerging | River Oak vs. Pin Oak Equity |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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