Correlation Between Angel Oak and Eafe Choice

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

By analyzing existing cross correlation between Angel Oak Ultrashort and The Eafe Choice, you can compare the effects of market volatilities on Angel Oak and Eafe Choice 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 Eafe Choice. Check out your portfolio center. Please also check ongoing floating volatility patterns of Angel Oak and Eafe Choice.

Diversification Opportunities for Angel Oak and Eafe Choice

0.34

Correlation Coefficient

Angel Oak  Eafe Choice

Weak diversification

The 3 months correlation between Angel and EAFE is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Angel Oak Ultrashort and The Eafe Choice in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eafe Choice 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 Ultrashort are associated (or correlated) with Eafe Choice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eafe Choice has no effect on the direction of Angel Oak i.e., Angel Oak and Eafe Choice go up and down completely randomly.

Pair Corralation between Angel Oak and Eafe Choice

Assuming the 90 days horizon Angel Oak is expected to generate 5.69 times less return on investment than Eafe Choice. But when comparing it to its historical volatility, Angel Oak Ultrashort is 18.99 times less risky than Eafe Choice. It trades about 0.22 of its potential returns per unit of risk. The Eafe Choice is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,463  in The Eafe Choice on December 2, 2024 and sell it today you would earn a total of  16.00  from holding The Eafe Choice or generate 1.09% return on investment over 90 days.

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

Angel Oak Ultrashort  vs.  The Eafe Choice

Angel Oak Ultrashort

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Angel Oak Ultrashort are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Angel Oak is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Eafe Choice

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Eafe Choice are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Eafe Choice 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 Eafe Choice

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

The idea behind Angel Oak Ultrashort and The Eafe Choice 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.