Correlation Between Oak Ridge and Oak Ridge

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

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

Diversification Opportunities for Oak Ridge and Oak Ridge

0.8

Correlation Coefficient

Oak Ridge  Oak Ridge

Very poor diversification

The 3 months correlation between Oak and Oak is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Oak Ridge Multi and Oak Ridge Dynamic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oak Ridge Dynamic and Oak Ridge 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 Oak Ridge Multi 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 Dynamic has no effect on the direction of Oak Ridge i.e., Oak Ridge and Oak Ridge go up and down completely randomly.

Pair Corralation between Oak Ridge and Oak Ridge

Assuming the 90 days horizon Oak Ridge Multi is expected to generate 0.54 times more return on investment than Oak Ridge. However, Oak Ridge Multi is 1.84 times less risky than Oak Ridge. It trades about -0.01 of its potential returns per unit of risk. Oak Ridge Dynamic is currently generating about -0.08 per unit of risk. If you would invest  1,936  in Oak Ridge Multi on December 27, 2024 and sell it today you would lose (11.00) from holding Oak Ridge Multi or give up 0.57% of portfolio value over 90 days.

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

Oak Ridge Multi  vs.  Oak Ridge Dynamic

Oak Ridge Multi

Risk-Adjusted Performance

Very Weak

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

Oak Ridge Dynamic

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Oak Ridge and Oak Ridge

The main advantage of trading using opposite Oak Ridge and Oak Ridge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oak Ridge 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 Oak Ridge Multi and Oak Ridge Dynamic 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.