Correlation Between Small-cap Value and Live Oak
Can any of the company-specific risk be diversified away by investing in both Small-cap Value and Live Oak 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 Small-cap Value and Live Oak into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Value Fund and Live Oak Health, you can compare the effects of market volatilities on Small-cap Value and Live Oak 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 Small-cap Value with a short position of Live Oak. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small-cap Value and Live Oak.
Diversification Opportunities for Small-cap Value and Live Oak
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Small-cap and Live is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value Fund and Live Oak Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Live Oak Health and Small-cap Value 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 Small Cap Value Fund are associated (or correlated) with Live Oak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Live Oak Health has no effect on the direction of Small-cap Value i.e., Small-cap Value and Live Oak go up and down completely randomly.
Pair Corralation between Small-cap Value and Live Oak
Assuming the 90 days horizon Small Cap Value Fund is expected to under-perform the Live Oak. In addition to that, Small-cap Value is 2.02 times more volatile than Live Oak Health. It trades about -0.43 of its total potential returns per unit of risk. Live Oak Health is currently generating about -0.52 per unit of volatility. If you would invest 2,199 in Live Oak Health on October 4, 2024 and sell it today you would lose (191.00) from holding Live Oak Health or give up 8.69% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Small Cap Value Fund vs. Live Oak Health
Performance |
Timeline |
Small Cap Value |
Live Oak Health |
Small-cap Value and Live Oak Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Small-cap Value and Live Oak
The main advantage of trading using opposite Small-cap Value and Live Oak positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small-cap Value position performs unexpectedly, Live Oak 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 Live Oak will offset losses from the drop in Live Oak's long position.Small-cap Value vs. Aggressive Investors 1 | Small-cap Value vs. Ultra Small Pany Market | Small-cap Value vs. Ultra Small Pany Fund | Small-cap Value vs. Omni Small Cap Value |
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Check out your portfolio center.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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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