Correlation Between Pin Oak and Live Oak

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

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

Diversification Opportunities for Pin Oak and Live Oak

-0.27

Correlation Coefficient

Pin Oak  Live Oak

Very good diversification

The 3 months correlation between Pin and Live is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Pin Oak Equity 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 Pin 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 Pin Oak Equity 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 Pin Oak i.e., Pin Oak and Live Oak go up and down completely randomly.

Pair Corralation between Pin Oak and Live Oak

Assuming the 90 days horizon Pin Oak Equity is expected to generate 1.07 times more return on investment than Live Oak. However, Pin Oak is 1.07 times more volatile than Live Oak Health. It trades about 0.12 of its potential returns per unit of risk. Live Oak Health is currently generating about -0.09 per unit of risk. If you would invest  8,667  in Pin Oak Equity on August 31, 2024 and sell it today you would earn a total of  526.00  from holding Pin Oak Equity or generate 6.07% return on investment over 90 days.

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

Pin Oak Equity  vs.  Live Oak Health

Pin Oak Equity

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pin Oak Equity are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Pin Oak is not utilizing all of its potentials. The recent 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 Pin Oak and Live Oak

The main advantage of trading using opposite Pin Oak and Live Oak positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pin Oak 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 Pin Oak Equity 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.