Correlation Between Red Oak and State Street
Can any of the company-specific risk be diversified away by investing in both Red Oak and State Street 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 State Street 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 State Street Target, you can compare the effects of market volatilities on Red Oak and State Street 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 State Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red Oak and State Street.
Diversification Opportunities for Red Oak and State Street
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Red and State is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Red Oak Technology and State Street Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street Target 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 State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street Target has no effect on the direction of Red Oak i.e., Red Oak and State Street go up and down completely randomly.
Pair Corralation between Red Oak and State Street
Assuming the 90 days horizon Red Oak Technology is expected to generate 4.28 times more return on investment than State Street. However, Red Oak is 4.28 times more volatile than State Street Target. It trades about 0.07 of its potential returns per unit of risk. State Street Target is currently generating about 0.2 per unit of risk. If you would invest 4,943 in Red Oak Technology on September 14, 2024 and sell it today you would earn a total of 69.00 from holding Red Oak Technology or generate 1.4% 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. State Street Target
Performance |
| Timeline |
| Red Oak Technology |
| State Street Target |
Red Oak and State Street Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Red Oak and State Street
The main advantage of trading using opposite Red Oak and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Red Oak position performs unexpectedly, State Street 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 State Street will offset losses from the drop in State Street'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 |
| State Street vs. State Street Target | State Street vs. State Street Target | State Street vs. Ssga International Stock | State Street vs. State Street Target |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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