Correlation Between Red Oak and New Economy
Can any of the company-specific risk be diversified away by investing in both Red Oak and New Economy 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 New Economy 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 New Economy Fund, you can compare the effects of market volatilities on Red Oak and New Economy 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 New Economy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red Oak and New Economy.
Diversification Opportunities for Red Oak and New Economy
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Red and New is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Red Oak Technology and New Economy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Economy Fund 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 New Economy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Economy Fund has no effect on the direction of Red Oak i.e., Red Oak and New Economy go up and down completely randomly.
Pair Corralation between Red Oak and New Economy
Assuming the 90 days horizon Red Oak is expected to generate 1.76 times less return on investment than New Economy. In addition to that, Red Oak is 1.34 times more volatile than New Economy Fund. It trades about 0.03 of its total potential returns per unit of risk. New Economy Fund is currently generating about 0.08 per unit of volatility. If you would invest 5,999 in New Economy Fund on August 24, 2024 and sell it today you would earn a total of 577.00 from holding New Economy Fund or generate 9.62% 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. New Economy Fund
Performance |
| Timeline |
| Red Oak Technology |
| New Economy Fund |
Red Oak and New Economy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Red Oak and New Economy
The main advantage of trading using opposite Red Oak and New Economy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Red Oak position performs unexpectedly, New Economy 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 New Economy will offset losses from the drop in New Economy'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 |
| New Economy vs. Red Oak Technology | New Economy vs. Ab Value Fund | New Economy vs. Qs Large Cap | New Economy vs. Falcon Focus Scv |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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