Correlation Between Swan Defined and Live Oak

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

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

Diversification Opportunities for Swan Defined and Live Oak

0.54

Correlation Coefficient

Swan Defined  Live Oak

Very weak diversification

The 3 months correlation between Swan and Live is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Swan Defined Risk 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 Swan Defined 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 Swan Defined Risk 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 Swan Defined i.e., Swan Defined and Live Oak go up and down completely randomly.

Pair Corralation between Swan Defined and Live Oak

Assuming the 90 days horizon Swan Defined Risk is expected to generate 0.93 times more return on investment than Live Oak. However, Swan Defined Risk is 1.07 times less risky than Live Oak. It trades about -0.18 of its potential returns per unit of risk. Live Oak Health is currently generating about -0.25 per unit of risk. If you would invest  941.00  in Swan Defined Risk on October 7, 2024 and sell it today you would lose (57.00) from holding Swan Defined Risk or give up 6.06% of portfolio value over 90 days.

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

Swan Defined Risk  vs.  Live Oak Health

Swan Defined Risk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Swan Defined Risk has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund 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 Swan Defined and Live Oak

The main advantage of trading using opposite Swan Defined and Live Oak positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Swan Defined 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 Swan Defined Risk 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.