Correlation Between Red Oak and Multifactor Equity
Can any of the company-specific risk be diversified away by investing in both Red Oak and Multifactor Equity 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 Multifactor Equity 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 Multifactor Equity Fund, you can compare the effects of market volatilities on Red Oak and Multifactor Equity 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 Multifactor Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red Oak and Multifactor Equity.
Diversification Opportunities for Red Oak and Multifactor Equity
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Red and Multifactor is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Red Oak Technology and Multifactor Equity Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multifactor Equity 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 Multifactor Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multifactor Equity has no effect on the direction of Red Oak i.e., Red Oak and Multifactor Equity go up and down completely randomly.
Pair Corralation between Red Oak and Multifactor Equity
Assuming the 90 days horizon Red Oak Technology is expected to generate 1.88 times more return on investment than Multifactor Equity. However, Red Oak is 1.88 times more volatile than Multifactor Equity Fund. It trades about 0.3 of its potential returns per unit of risk. Multifactor Equity Fund is currently generating about 0.25 per unit of risk. If you would invest 4,814 in Red Oak Technology on September 19, 2024 and sell it today you would earn a total of 259.00 from holding Red Oak Technology or generate 5.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Red Oak Technology vs. Multifactor Equity Fund
Performance |
| Timeline |
| Red Oak Technology |
| Multifactor Equity |
Red Oak and Multifactor Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Red Oak and Multifactor Equity
The main advantage of trading using opposite Red Oak and Multifactor Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Red Oak position performs unexpectedly, Multifactor Equity 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 Multifactor Equity will offset losses from the drop in Multifactor Equity'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 |
| Multifactor Equity vs. Red Oak Technology | Multifactor Equity vs. Biotechnology Ultrasector Profund | Multifactor Equity vs. Allianzgi Technology Fund | Multifactor Equity vs. Towpath 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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