Correlation Between Red Oak and Sound Shore
Can any of the company-specific risk be diversified away by investing in both Red Oak and Sound Shore 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 Sound Shore 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 Sound Shore Fund, you can compare the effects of market volatilities on Red Oak and Sound Shore 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 Sound Shore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red Oak and Sound Shore.
Diversification Opportunities for Red Oak and Sound Shore
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Red and Sound is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Red Oak Technology and Sound Shore Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sound Shore 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 Sound Shore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sound Shore Fund has no effect on the direction of Red Oak i.e., Red Oak and Sound Shore go up and down completely randomly.
Pair Corralation between Red Oak and Sound Shore
Assuming the 90 days horizon Red Oak is expected to generate 1.46 times less return on investment than Sound Shore. In addition to that, Red Oak is 1.78 times more volatile than Sound Shore Fund. It trades about 0.06 of its total potential returns per unit of risk. Sound Shore Fund is currently generating about 0.16 per unit of volatility. If you would invest 4,650 in Sound Shore Fund on August 28, 2024 and sell it today you would earn a total of 337.00 from holding Sound Shore Fund or generate 7.25% 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. Sound Shore Fund
Performance |
| Timeline |
| Red Oak Technology |
| Sound Shore Fund |
Red Oak and Sound Shore Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Red Oak and Sound Shore
The main advantage of trading using opposite Red Oak and Sound Shore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Red Oak position performs unexpectedly, Sound Shore 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 Sound Shore will offset losses from the drop in Sound Shore's long position.| Red Oak vs. White Oak Select | Red Oak vs. Black Oak Emerging | Red Oak vs. Berkshire Focus | Red Oak vs. Janus Global Technology |
| Sound Shore vs. Hartford Schroders Smallmid | Sound Shore vs. Hartford Schroders Smallmid | Sound Shore vs. Praxis Growth Index | Sound Shore vs. Ab E Opportunities |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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