Correlation Between Angel Oak and Energy Basic

Can any of the company-specific risk be diversified away by investing in both Angel Oak and Energy Basic 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 Angel Oak and Energy Basic into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Angel Oak Multi Strategy and Energy Basic Materials, you can compare the effects of market volatilities on Angel Oak and Energy Basic 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 Angel Oak with a short position of Energy Basic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Angel Oak and Energy Basic.

Diversification Opportunities for Angel Oak and Energy Basic

0.09

Correlation Coefficient

Angel Oak  Energy Basic

Significant diversification

The 3 months correlation between Angel and Energy is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Angel Oak Multi Strategy and Energy Basic Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Basic Materials and Angel 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 Angel Oak Multi Strategy are associated (or correlated) with Energy Basic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Basic Materials has no effect on the direction of Angel Oak i.e., Angel Oak and Energy Basic go up and down completely randomly.

Pair Corralation between Angel Oak and Energy Basic

Assuming the 90 days horizon Angel Oak is expected to generate 3.02 times less return on investment than Energy Basic. But when comparing it to its historical volatility, Angel Oak Multi Strategy is 5.11 times less risky than Energy Basic. It trades about 0.18 of its potential returns per unit of risk. Energy Basic Materials is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,260  in Energy Basic Materials on December 29, 2024 and sell it today you would earn a total of  75.00  from holding Energy Basic Materials or generate 5.95% return on investment over 90 days.

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

Angel Oak Multi Strategy  vs.  Energy Basic Materials

Angel Oak Multi

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Angel Oak Multi Strategy are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Angel Oak is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Energy Basic Materials

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Basic Materials are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Energy Basic is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Angel Oak and Energy Basic

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

The idea behind Angel Oak Multi Strategy and Energy Basic Materials 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.