Correlation Between Gmo Core and Live Oak

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

By analyzing existing cross correlation between Gmo E Plus and Live Oak Health, you can compare the effects of market volatilities on Gmo Core 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 Gmo Core with a short position of Live Oak. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo Core and Live Oak.

Diversification Opportunities for Gmo Core and Live Oak

0.61

Correlation Coefficient

Gmo Core  Live Oak

Poor diversification

The 3 months correlation between Gmo and Live is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Gmo E Plus 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 Gmo Core 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 Gmo E Plus 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 Gmo Core i.e., Gmo Core and Live Oak go up and down completely randomly.

Pair Corralation between Gmo Core and Live Oak

Assuming the 90 days horizon Gmo Core is expected to generate 1.35 times less return on investment than Live Oak. But when comparing it to its historical volatility, Gmo E Plus is 2.22 times less risky than Live Oak. It trades about 0.08 of its potential returns per unit of risk. Live Oak Health is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,116  in Live Oak Health on August 31, 2024 and sell it today you would earn a total of  92.00  from holding Live Oak Health or generate 4.35% return on investment over 90 days.

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

Gmo E Plus  vs.  Live Oak Health

Gmo E Plus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gmo E Plus has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Gmo Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Live Oak Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Live Oak Health has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Live Oak is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Gmo Core and Live Oak

The main advantage of trading using opposite Gmo Core and Live Oak positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo Core 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.

The idea behind Gmo E Plus and Live Oak Health 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..