Correlation Between State Street and Oaktree Capital
Can any of the company-specific risk be diversified away by investing in both State Street and Oaktree Capital 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 State Street and Oaktree Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between State Street and Oaktree Capital Group, you can compare the effects of market volatilities on State Street and Oaktree Capital 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 State Street with a short position of Oaktree Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Street and Oaktree Capital.
Diversification Opportunities for State Street and Oaktree Capital
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between State and Oaktree is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding State Street and Oaktree Capital Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oaktree Capital Group and State Street 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 State Street are associated (or correlated) with Oaktree Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oaktree Capital Group has no effect on the direction of State Street i.e., State Street and Oaktree Capital go up and down completely randomly.
Pair Corralation between State Street and Oaktree Capital
Assuming the 90 days trading horizon State Street is expected to under-perform the Oaktree Capital. But the preferred stock apears to be less risky and, when comparing its historical volatility, State Street is 1.5 times less risky than Oaktree Capital. The preferred stock trades about -0.05 of its potential returns per unit of risk. The Oaktree Capital Group is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 2,164 in Oaktree Capital Group on December 15, 2024 and sell it today you would earn a total of 6.00 from holding Oaktree Capital Group or generate 0.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
State Street vs. Oaktree Capital Group
Performance |
| Timeline |
| State Street |
| Oaktree Capital Group |
State Street and Oaktree Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with State Street and Oaktree Capital
The main advantage of trading using opposite State Street and Oaktree Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Street position performs unexpectedly, Oaktree Capital 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 Oaktree Capital will offset losses from the drop in Oaktree Capital's long position.| State Street vs. The Gabelli Equity | ||
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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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