Correlation Between Live Oak and Destinations Large

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

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

Diversification Opportunities for Live Oak and Destinations Large

0.68

Correlation Coefficient

Live Oak  Destinations Large

Poor diversification

The 3 months correlation between Live and Destinations is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Live Oak Health and Destinations Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Destinations Large Cap and Live 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 Live Oak Health are associated (or correlated) with Destinations Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Destinations Large Cap has no effect on the direction of Live Oak i.e., Live Oak and Destinations Large go up and down completely randomly.

Pair Corralation between Live Oak and Destinations Large

Assuming the 90 days horizon Live Oak Health is expected to under-perform the Destinations Large. But the mutual fund apears to be less risky and, when comparing its historical volatility, Live Oak Health is 1.69 times less risky than Destinations Large. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Destinations Large Cap is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  913.00  in Destinations Large Cap on October 5, 2024 and sell it today you would earn a total of  173.00  from holding Destinations Large Cap or generate 18.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Live Oak Health  vs.  Destinations Large Cap

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 latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Destinations Large Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Destinations Large Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Live Oak and Destinations Large

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

The idea behind Live Oak Health and Destinations Large 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.