Correlation Between Red Oak and Great West

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

Diversification Opportunities for Red Oak and Great West

-0.67

Correlation Coefficient

Red Oak  Great West

Excellent diversification

The 3 months correlation between Red and Great is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Red Oak Technology and Great West Short Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great West Short 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 Great West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great West Short has no effect on the direction of Red Oak i.e., Red Oak and Great West go up and down completely randomly.

Pair Corralation between Red Oak and Great West

Assuming the 90 days horizon Red Oak Technology is expected to under-perform the Great West. In addition to that, Red Oak is 17.45 times more volatile than Great West Short Duration. It trades about -0.14 of its total potential returns per unit of risk. Great West Short Duration is currently generating about 0.34 per unit of volatility. If you would invest  1,022  in Great West Short Duration on December 21, 2024 and sell it today you would earn a total of  19.00  from holding Great West Short Duration or generate 1.86% return on investment over 90 days.

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

Red Oak Technology  vs.  Great West Short Duration

Red Oak Technology

Risk-Adjusted Performance

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 weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Great West Short

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Great West Short Duration are ranked lower than 26 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Great West 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 Great West

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

The idea behind Red Oak Technology and Great West Short Duration 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.