Correlation Between Red Oak and Rock Oak
Can any of the company-specific risk be diversified away by investing in both Red Oak and Rock 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 Red Oak and Rock Oak 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 Rock Oak E, you can compare the effects of market volatilities on Red Oak and Rock 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 Red Oak with a short position of Rock Oak. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red Oak and Rock Oak.
Diversification Opportunities for Red Oak and Rock Oak
Very poor diversification
The 3 months correlation between Red and Rock is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Red Oak Technology and Rock Oak E in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rock Oak E 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 Rock Oak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rock Oak E has no effect on the direction of Red Oak i.e., Red Oak and Rock Oak go up and down completely randomly.
Pair Corralation between Red Oak and Rock Oak
Assuming the 90 days horizon Red Oak is expected to generate 6.21 times less return on investment than Rock Oak. In addition to that, Red Oak is 1.23 times more volatile than Rock Oak E. It trades about 0.03 of its total potential returns per unit of risk. Rock Oak E is currently generating about 0.25 per unit of volatility. If you would invest 1,963 in Rock Oak E on August 24, 2024 and sell it today you would earn a total of 116.00 from holding Rock Oak E or generate 5.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Red Oak Technology vs. Rock Oak E
Performance |
| Timeline |
| Red Oak Technology |
| Rock Oak E |
Red Oak and Rock Oak Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Red Oak and Rock Oak
The main advantage of trading using opposite Red Oak and Rock Oak positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Red Oak position performs unexpectedly, Rock 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 Rock Oak will offset losses from the drop in Rock Oak's long position.| Red Oak vs. Pin Oak Equity | Red Oak vs. White Oak Select | Red Oak vs. Black Oak Emerging | Red Oak vs. Berkshire Focus |
| Rock Oak vs. Live Oak Health | Rock Oak vs. River Oak Discovery | Rock Oak vs. Black Oak Emerging | Rock 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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