Correlation Between Us Government and Oak Ridge

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

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

Diversification Opportunities for Us Government and Oak Ridge

-0.71

Correlation Coefficient

Us Government  Oak Ridge

Pay attention - limited upside

The 3 months correlation between GVPIX and Oak is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Us Government Plus and Oak Ridge Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oak Ridge Small and Us Government 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 Us Government Plus are associated (or correlated) with Oak Ridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oak Ridge Small has no effect on the direction of Us Government i.e., Us Government and Oak Ridge go up and down completely randomly.

Pair Corralation between Us Government and Oak Ridge

Assuming the 90 days horizon Us Government is expected to generate 10.29 times less return on investment than Oak Ridge. But when comparing it to its historical volatility, Us Government Plus is 1.18 times less risky than Oak Ridge. It trades about 0.03 of its potential returns per unit of risk. Oak Ridge Small is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  1,068  in Oak Ridge Small on September 4, 2024 and sell it today you would earn a total of  108.00  from holding Oak Ridge Small or generate 10.11% return on investment over 90 days.

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

Us Government Plus  vs.  Oak Ridge Small

Us Government Plus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Us Government Plus has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Oak Ridge Small

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Oak Ridge Small are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Oak Ridge showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Us Government and Oak Ridge

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

The idea behind Us Government Plus and Oak Ridge Small 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..