Correlation Between Timken and Oak Woods
Can any of the company-specific risk be diversified away by investing in both Timken and Oak Woods 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 Timken and Oak Woods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Timken Company and Oak Woods Acquisition, you can compare the effects of market volatilities on Timken and Oak Woods 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 Timken with a short position of Oak Woods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Timken and Oak Woods.
Diversification Opportunities for Timken and Oak Woods
Very good diversification
The 3 months correlation between Timken and Oak is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Timken Company and Oak Woods Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oak Woods Acquisition and Timken 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 Timken Company are associated (or correlated) with Oak Woods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oak Woods Acquisition has no effect on the direction of Timken i.e., Timken and Oak Woods go up and down completely randomly.
Pair Corralation between Timken and Oak Woods
Considering the 90-day investment horizon Timken Company is expected to under-perform the Oak Woods. In addition to that, Timken is 2.23 times more volatile than Oak Woods Acquisition. It trades about -0.07 of its total potential returns per unit of risk. Oak Woods Acquisition is currently generating about 0.04 per unit of volatility. If you would invest 1,138 in Oak Woods Acquisition on September 2, 2024 and sell it today you would earn a total of 12.00 from holding Oak Woods Acquisition or generate 1.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Timken Company vs. Oak Woods Acquisition
Performance |
| Timeline |
| Timken Company |
| Oak Woods Acquisition |
Timken and Oak Woods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Timken and Oak Woods
The main advantage of trading using opposite Timken and Oak Woods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Timken position performs unexpectedly, Oak Woods 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 Oak Woods will offset losses from the drop in Oak Woods' long position.The idea behind Timken Company and Oak Woods Acquisition pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Oak Woods vs. Timken Company | Oak Woods vs. Estee Lauder Companies | Oak Woods vs. Eastern Co | Oak Woods vs. Valneva SE ADR |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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