Correlation Between Red Oak and Stone Ridge
Can any of the company-specific risk be diversified away by investing in both Red Oak and Stone Ridge 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 Stone Ridge 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 Stone Ridge Diversified, you can compare the effects of market volatilities on Red Oak and Stone Ridge 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 Stone Ridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red Oak and Stone Ridge.
Diversification Opportunities for Red Oak and Stone Ridge
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Red and Stone is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Red Oak Technology and Stone Ridge Diversified in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stone Ridge Diversified 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 Stone Ridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stone Ridge Diversified has no effect on the direction of Red Oak i.e., Red Oak and Stone Ridge go up and down completely randomly.
Pair Corralation between Red Oak and Stone Ridge
Assuming the 90 days horizon Red Oak Technology is expected to generate 6.78 times more return on investment than Stone Ridge. However, Red Oak is 6.78 times more volatile than Stone Ridge Diversified. It trades about 0.12 of its potential returns per unit of risk. Stone Ridge Diversified is currently generating about 0.61 per unit of risk. If you would invest 4,910 in Red Oak Technology on September 15, 2024 and sell it today you would earn a total of 123.00 from holding Red Oak Technology or generate 2.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Red Oak Technology vs. Stone Ridge Diversified
Performance |
| Timeline |
| Red Oak Technology |
| Stone Ridge Diversified |
Red Oak and Stone Ridge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Red Oak and Stone Ridge
The main advantage of trading using opposite Red Oak and Stone Ridge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Red Oak position performs unexpectedly, Stone Ridge 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 Stone Ridge will offset losses from the drop in Stone Ridge'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 |
| Stone Ridge vs. Stone Ridge High | Stone Ridge vs. Stone Ridge High | Stone Ridge vs. Red Oak Technology | Stone Ridge vs. John Hancock Focused |
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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