Correlation Between Live Oak and Fidelity Flex

Can any of the company-specific risk be diversified away by investing in both Live Oak and Fidelity Flex 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 Fidelity Flex 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 Fidelity Flex Freedom, you can compare the effects of market volatilities on Live Oak and Fidelity Flex 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 Fidelity Flex. Check out your portfolio center. Please also check ongoing floating volatility patterns of Live Oak and Fidelity Flex.

Diversification Opportunities for Live Oak and Fidelity Flex

0.7

Correlation Coefficient

Live Oak  Fidelity Flex

Poor diversification

The 3 months correlation between LIVE and Fidelity is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Live Oak Health and Fidelity Flex Freedom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Flex Freedom 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 Fidelity Flex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Flex Freedom has no effect on the direction of Live Oak i.e., Live Oak and Fidelity Flex go up and down completely randomly.

Pair Corralation between Live Oak and Fidelity Flex

Assuming the 90 days horizon Live Oak Health is expected to under-perform the Fidelity Flex. In addition to that, Live Oak is 1.08 times more volatile than Fidelity Flex Freedom. It trades about -0.06 of its total potential returns per unit of risk. Fidelity Flex Freedom is currently generating about -0.05 per unit of volatility. If you would invest  1,345  in Fidelity Flex Freedom on November 29, 2024 and sell it today you would lose (31.00) from holding Fidelity Flex Freedom or give up 2.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Live Oak Health  vs.  Fidelity Flex Freedom

Live Oak Health

Risk-Adjusted Performance

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.

Fidelity Flex Freedom

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Live Oak and Fidelity Flex

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

The idea behind Live Oak Health and Fidelity Flex Freedom 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.