Correlation Between Red Oak and Walthausen Small
Can any of the company-specific risk be diversified away by investing in both Red Oak and Walthausen Small 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 Walthausen Small 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 Walthausen Small Cap, you can compare the effects of market volatilities on Red Oak and Walthausen Small 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 Walthausen Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red Oak and Walthausen Small.
Diversification Opportunities for Red Oak and Walthausen Small
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Red and Walthausen is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Red Oak Technology and Walthausen Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walthausen Small Cap 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 Walthausen Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walthausen Small Cap has no effect on the direction of Red Oak i.e., Red Oak and Walthausen Small go up and down completely randomly.
Pair Corralation between Red Oak and Walthausen Small
Assuming the 90 days horizon Red Oak is expected to generate 3.25 times less return on investment than Walthausen Small. But when comparing it to its historical volatility, Red Oak Technology is 1.33 times less risky than Walthausen Small. It trades about 0.17 of its potential returns per unit of risk. Walthausen Small Cap is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest 1,554 in Walthausen Small Cap on September 4, 2024 and sell it today you would earn a total of 207.00 from holding Walthausen Small Cap or generate 13.32% 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. Walthausen Small Cap
Performance |
| Timeline |
| Red Oak Technology |
| Walthausen Small Cap |
Red Oak and Walthausen Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Red Oak and Walthausen Small
The main advantage of trading using opposite Red Oak and Walthausen Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Red Oak position performs unexpectedly, Walthausen Small 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 Walthausen Small will offset losses from the drop in Walthausen Small'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 |
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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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