Correlation Between Red Oak and American Balanced
Can any of the company-specific risk be diversified away by investing in both Red Oak and American Balanced 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 Red Oak and American Balanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Red Oak Technology and American Balanced Fund, you can compare the effects of market volatilities on Red Oak and American Balanced 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 Red Oak with a short position of American Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red Oak and American Balanced.
Diversification Opportunities for Red Oak and American Balanced
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Red and American is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Red Oak Technology and American Balanced Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Balanced and Red 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 Red Oak Technology are associated (or correlated) with American Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Balanced has no effect on the direction of Red Oak i.e., Red Oak and American Balanced go up and down completely randomly.
Pair Corralation between Red Oak and American Balanced
Assuming the 90 days horizon Red Oak Technology is expected to generate 2.26 times more return on investment than American Balanced. However, Red Oak is 2.26 times more volatile than American Balanced Fund. It trades about 0.1 of its potential returns per unit of risk. American Balanced Fund is currently generating about 0.11 per unit of risk. If you would invest 2,768 in Red Oak Technology on August 30, 2024 and sell it today you would earn a total of 2,081 from holding Red Oak Technology or generate 75.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Red Oak Technology vs. American Balanced Fund
Performance |
| Timeline |
| Red Oak Technology |
| American Balanced |
Red Oak and American Balanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Red Oak and American Balanced
The main advantage of trading using opposite Red Oak and American Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Red Oak position performs unexpectedly, American Balanced 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 American Balanced will offset losses from the drop in American Balanced's long position.| Red Oak vs. Live Oak Health | Red Oak vs. HUMANA INC | Red Oak vs. Aquagold International | Red Oak vs. Barloworld Ltd ADR |
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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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