Correlation Between Scharf Global and Red Oak
Can any of the company-specific risk be diversified away by investing in both Scharf Global and Red 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 Scharf Global and Red Oak into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Scharf Global Opportunity and Red Oak Technology, you can compare the effects of market volatilities on Scharf Global and Red 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 Scharf Global with a short position of Red Oak. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scharf Global and Red Oak.
Diversification Opportunities for Scharf Global and Red Oak
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Scharf and Red is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Scharf Global Opportunity and Red Oak Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red Oak Technology and Scharf Global 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 Scharf Global Opportunity are associated (or correlated) with Red Oak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red Oak Technology has no effect on the direction of Scharf Global i.e., Scharf Global and Red Oak go up and down completely randomly.
Pair Corralation between Scharf Global and Red Oak
Assuming the 90 days horizon Scharf Global Opportunity is expected to generate 0.53 times more return on investment than Red Oak. However, Scharf Global Opportunity is 1.89 times less risky than Red Oak. It trades about 0.14 of its potential returns per unit of risk. Red Oak Technology is currently generating about 0.03 per unit of risk. If you would invest 3,688 in Scharf Global Opportunity on August 24, 2024 and sell it today you would earn a total of 80.00 from holding Scharf Global Opportunity or generate 2.17% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Scharf Global Opportunity vs. Red Oak Technology
Performance |
Timeline |
Scharf Global Opportunity |
Red Oak Technology |
Scharf Global and Red Oak Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Scharf Global and Red Oak
The main advantage of trading using opposite Scharf Global and Red Oak positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scharf Global position performs unexpectedly, Red 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 Red Oak will offset losses from the drop in Red Oak's long position.Scharf Global vs. Doubleline Emerging Markets | Scharf Global vs. Siit Emerging Markets | Scharf Global vs. Barings Emerging Markets | Scharf Global vs. Transamerica Emerging Markets |
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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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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