Correlation Between Black Oak and Ab Small

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

By analyzing existing cross correlation between Black Oak Emerging and Ab Small Cap, you can compare the effects of market volatilities on Black Oak and Ab Small 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 Black Oak with a short position of Ab Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Black Oak and Ab Small.

Diversification Opportunities for Black Oak and Ab Small

0.79

Correlation Coefficient

Black Oak  Ab Small

Poor diversification

The 3 months correlation between Black and SCAVX is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Black Oak Emerging and Ab Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Small Cap and Black 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 Black Oak Emerging are associated (or correlated) with Ab Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Small Cap has no effect on the direction of Black Oak i.e., Black Oak and Ab Small go up and down completely randomly.

Pair Corralation between Black Oak and Ab Small

Assuming the 90 days horizon Black Oak is expected to generate 1.47 times less return on investment than Ab Small. In addition to that, Black Oak is 1.06 times more volatile than Ab Small Cap. It trades about 0.05 of its total potential returns per unit of risk. Ab Small Cap is currently generating about 0.08 per unit of volatility. If you would invest  1,274  in Ab Small Cap on September 4, 2024 and sell it today you would earn a total of  353.00  from holding Ab Small Cap or generate 27.71% return on investment over 90 days.

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

Black Oak Emerging  vs.  Ab Small Cap

Black Oak Emerging

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Black Oak Emerging are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Black Oak may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ab Small Cap

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ab Small Cap are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Ab Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Black Oak and Ab Small

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

The idea behind Black Oak Emerging and Ab Small Cap 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.