Correlation Between Red Oak and Total Return

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

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

Diversification Opportunities for Red Oak and Total Return

0.44

Correlation Coefficient

Red Oak  Total Return

Very weak diversification

The 3 months correlation between Red and Total is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Red Oak Technology and Total Return Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Total Return Bond and Red 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 Red Oak Technology are associated (or correlated) with Total Return. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Total Return Bond has no effect on the direction of Red Oak i.e., Red Oak and Total Return go up and down completely randomly.

Pair Corralation between Red Oak and Total Return

Assuming the 90 days horizon Red Oak Technology is expected to under-perform the Total Return. In addition to that, Red Oak is 5.56 times more volatile than Total Return Bond. It trades about -0.11 of its total potential returns per unit of risk. Total Return Bond is currently generating about 0.07 per unit of volatility. If you would invest  1,084  in Total Return Bond on October 22, 2024 and sell it today you would earn a total of  4.00  from holding Total Return Bond or generate 0.37% return on investment over 90 days.

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

Red Oak Technology  vs.  Total Return Bond

Red Oak Technology

Risk-Adjusted Performance

0 of 100

Very Weak

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

Total Return Bond

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Red Oak and Total Return

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

The idea behind Red Oak Technology and Total Return Bond 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.