Correlation Between White Oak and River Oak
Can any of the company-specific risk be diversified away by investing in both White Oak and River Oak 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 White Oak and River Oak into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between White Oak Select and River Oak Discovery, you can compare the effects of market volatilities on White Oak and River Oak 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 White Oak with a short position of River Oak. Check out your portfolio center. Please also check ongoing floating volatility patterns of White Oak and River Oak.
Diversification Opportunities for White Oak and River Oak
Very poor diversification
The 3 months correlation between White and River is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding White Oak Select and River Oak Discovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on River Oak Discovery and White 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 White Oak Select are associated (or correlated) with River Oak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of River Oak Discovery has no effect on the direction of White Oak i.e., White Oak and River Oak go up and down completely randomly.
Pair Corralation between White Oak and River Oak
Assuming the 90 days horizon White Oak is expected to generate 5.11 times less return on investment than River Oak. But when comparing it to its historical volatility, White Oak Select is 1.68 times less risky than River Oak. It trades about 0.07 of its potential returns per unit of risk. River Oak Discovery is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 1,816 in River Oak Discovery on August 28, 2024 and sell it today you would earn a total of 128.00 from holding River Oak Discovery or generate 7.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
White Oak Select vs. River Oak Discovery
Performance |
| Timeline |
| White Oak Select |
| River Oak Discovery |
White Oak and River Oak Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with White Oak and River Oak
The main advantage of trading using opposite White Oak and River Oak positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if White Oak position performs unexpectedly, River Oak 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 River Oak will offset losses from the drop in River Oak's long position.| White Oak vs. Red Oak Technology | White Oak vs. Pin Oak Equity | White Oak vs. Black Oak Emerging | White Oak vs. Victory Rs Small |
| River Oak vs. Rock Oak E | River Oak vs. Live Oak Health | River Oak vs. Black Oak Emerging | River Oak vs. Pin Oak Equity |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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