Correlation Between Angel Oak and Rational Special

Can any of the company-specific risk be diversified away by investing in both Angel Oak and Rational Special 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 Rational Special 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 Rational Special Situations, you can compare the effects of market volatilities on Angel Oak and Rational Special 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 Rational Special. Check out your portfolio center. Please also check ongoing floating volatility patterns of Angel Oak and Rational Special.

Diversification Opportunities for Angel Oak and Rational Special

0.72

Correlation Coefficient

Angel Oak  Rational Special

Poor diversification

The 3 months correlation between Angel and Rational is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Angel Oak Ultrashort and Rational Special Situations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rational Special Sit 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 Rational Special. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rational Special Sit has no effect on the direction of Angel Oak i.e., Angel Oak and Rational Special go up and down completely randomly.

Pair Corralation between Angel Oak and Rational Special

Assuming the 90 days horizon Angel Oak is expected to generate 1.14 times less return on investment than Rational Special. But when comparing it to its historical volatility, Angel Oak Ultrashort is 1.04 times less risky than Rational Special. It trades about 0.22 of its potential returns per unit of risk. Rational Special Situations is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  1,660  in Rational Special Situations on October 5, 2024 and sell it today you would earn a total of  147.00  from holding Rational Special Situations or generate 8.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.68%
Values	Daily Returns

Angel Oak Ultrashort  vs.  Rational Special Situations

Angel Oak Ultrashort

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Angel Oak Ultrashort are ranked lower than 5 (%) 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.

Rational Special Sit

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rational Special Situations are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Rational Special 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 Rational Special

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

The idea behind Angel Oak Ultrashort and Rational Special Situations 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.