Correlation Between AJ Bell and Oakley Capital

Can any of the company-specific risk be diversified away by investing in both AJ Bell and Oakley 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 AJ Bell and Oakley Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AJ Bell plc and Oakley Capital Investments, you can compare the effects of market volatilities on AJ Bell and Oakley 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 AJ Bell with a short position of Oakley Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of AJ Bell and Oakley Capital.

Diversification Opportunities for AJ Bell and Oakley Capital

0.21

Correlation Coefficient

AJ Bell  Oakley Capital

Modest diversification

The 3 months correlation between AJB and Oakley is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding AJ Bell plc and Oakley Capital Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oakley Capital Inves and AJ Bell 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 AJ Bell plc are associated (or correlated) with Oakley Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oakley Capital Inves has no effect on the direction of AJ Bell i.e., AJ Bell and Oakley Capital go up and down completely randomly.

Pair Corralation between AJ Bell and Oakley Capital

Assuming the 90 days trading horizon AJ Bell plc is expected to generate 1.75 times more return on investment than Oakley Capital. However, AJ Bell is 1.75 times more volatile than Oakley Capital Investments. It trades about 0.05 of its potential returns per unit of risk. Oakley Capital Investments is currently generating about 0.01 per unit of risk. If you would invest  30,145  in AJ Bell plc on December 1, 2024 and sell it today you would earn a total of  11,805  from holding AJ Bell plc or generate 39.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

AJ Bell plc  vs.  Oakley Capital Investments

AJ Bell plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days AJ Bell plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Oakley Capital Inves

Risk-Adjusted Performance

Very Weak

Over the last 90 days Oakley Capital Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Oakley Capital is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with AJ Bell and Oakley Capital

The main advantage of trading using opposite AJ Bell and Oakley Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AJ Bell position performs unexpectedly, Oakley 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 Oakley Capital will offset losses from the drop in Oakley Capital's long position.

The idea behind AJ Bell plc and Oakley Capital Investments 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.

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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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.