Correlation Between Rock Oak and Pin Oak

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

Diversification Opportunities for Rock Oak and Pin Oak

0.26

Correlation Coefficient

Rock Oak  Pin Oak

Modest diversification

The 3 months correlation between Rock and Pin is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Rock Oak E and Pin Oak Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pin Oak Equity 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 Pin Oak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pin Oak Equity has no effect on the direction of Rock Oak i.e., Rock Oak and Pin Oak go up and down completely randomly.

Pair Corralation between Rock Oak and Pin Oak

Assuming the 90 days horizon Rock Oak E is expected to under-perform the Pin Oak. But the mutual fund apears to be less risky and, when comparing its historical volatility, Rock Oak E is 1.06 times less risky than Pin Oak. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Pin Oak Equity is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  7,763  in Pin Oak Equity on December 27, 2024 and sell it today you would earn a total of  103.00  from holding Pin Oak Equity or generate 1.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Rock Oak E  vs.  Pin Oak Equity

Rock Oak E

Risk-Adjusted Performance

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.

Pin Oak Equity

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pin Oak Equity are ranked lower than 2 (%) 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 current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Rock Oak and Pin Oak

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

The idea behind Rock Oak E and Pin Oak Equity 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.