Correlation Between Growth Fund and Live Oak

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

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

Diversification Opportunities for Growth Fund and Live Oak

-0.24

Correlation Coefficient

Growth Fund  Live Oak

Very good diversification

The 3 months correlation between Growth and Live is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Growth Fund C 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 Growth Fund 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 Growth Fund C 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 Growth Fund i.e., Growth Fund and Live Oak go up and down completely randomly.

Pair Corralation between Growth Fund and Live Oak

Assuming the 90 days horizon Growth Fund C is expected to under-perform the Live Oak. In addition to that, Growth Fund is 1.84 times more volatile than Live Oak Health. It trades about -0.11 of its total potential returns per unit of risk. Live Oak Health is currently generating about 0.09 per unit of volatility. If you would invest  2,006  in Live Oak Health on December 28, 2024 and sell it today you would earn a total of  84.00  from holding Live Oak Health or generate 4.19% return on investment over 90 days.

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

Growth Fund C  vs.  Live Oak Health

Growth Fund C

Risk-Adjusted Performance

Very Weak

Over the last 90 days Growth Fund C has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental 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

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Live Oak Health are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Live 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 Growth Fund and Live Oak

The main advantage of trading using opposite Growth Fund and Live Oak positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth Fund 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 Growth Fund C 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.

Check out your portfolio center.

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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.