Correlation Between Rock Oak and Live Oak

Can any of the company-specific risk be diversified away by investing in both Rock 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 Rock 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 Rock Oak E and Live Oak Health, you can compare the effects of market volatilities on Rock 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 Rock Oak with a short position of Live Oak. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rock Oak and Live Oak.

Diversification Opportunities for Rock Oak and Live Oak

0.47

Correlation Coefficient

Rock Oak  Live Oak

Very weak diversification

The 3 months correlation between Rock and Live is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Rock Oak E 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 Rock 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 Rock Oak E 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 Rock Oak i.e., Rock Oak and Live Oak go up and down completely randomly.

Pair Corralation between Rock Oak and Live Oak

Assuming the 90 days horizon Rock Oak E is expected to generate 1.07 times more return on investment than Live Oak. However, Rock Oak is 1.07 times more volatile than Live Oak Health. It trades about 0.07 of its potential returns per unit of risk. Live Oak Health is currently generating about -0.01 per unit of risk. If you would invest  1,495  in Rock Oak E on October 4, 2024 and sell it today you would earn a total of  430.00  from holding Rock Oak E or generate 28.76% return on investment over 90 days.

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

Rock Oak E  vs.  Live Oak Health

Rock Oak E

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rock Oak E has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Rock Oak is not utilizing all of its potentials. The current 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 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.

Pair Trading with Rock Oak and Live Oak

The main advantage of trading using opposite Rock Oak and Live Oak positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rock 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 Rock Oak E 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.