Correlation Between River Oak and Red Oak
Can any of the company-specific risk be diversified away by investing in both River Oak and Red 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 River Oak and Red Oak into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between River Oak Discovery and Red Oak Technology, you can compare the effects of market volatilities on River Oak and Red 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 River Oak with a short position of Red Oak. Check out your portfolio center. Please also check ongoing floating volatility patterns of River Oak and Red Oak.
Diversification Opportunities for River Oak and Red Oak
Poor diversification
The 3 months correlation between River and Red is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding River Oak Discovery and Red Oak Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red Oak Technology and River 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 River Oak Discovery are associated (or correlated) with Red Oak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red Oak Technology has no effect on the direction of River Oak i.e., River Oak and Red Oak go up and down completely randomly.
Pair Corralation between River Oak and Red Oak
Assuming the 90 days horizon River Oak Discovery is expected to generate 0.96 times more return on investment than Red Oak. However, River Oak Discovery is 1.04 times less risky than Red Oak. It trades about 0.09 of its potential returns per unit of risk. Red Oak Technology is currently generating about 0.05 per unit of risk. If you would invest 1,694 in River Oak Discovery on August 28, 2024 and sell it today you would earn a total of 250.00 from holding River Oak Discovery or generate 14.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
River Oak Discovery vs. Red Oak Technology
Performance |
| Timeline |
| River Oak Discovery |
| Red Oak Technology |
River Oak and Red Oak Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with River Oak and Red Oak
The main advantage of trading using opposite River Oak and Red Oak positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if River Oak position performs unexpectedly, Red 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 Red Oak will offset losses from the drop in Red Oak's long position.| River Oak vs. Rock Oak E | River Oak vs. Live Oak Health | River Oak vs. Black Oak Emerging | River Oak vs. Pin Oak Equity |
| Red Oak vs. White Oak Select | Red Oak vs. Black Oak Emerging | Red Oak vs. Berkshire Focus | Red Oak vs. Janus Global Technology |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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