Correlation Between Small Cap and Angel Oak

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

By analyzing existing cross correlation between Small Cap Stock and Angel Oak Multi Strategy, you can compare the effects of market volatilities on Small Cap and Angel 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 Small Cap with a short position of Angel Oak. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Angel Oak.

Diversification Opportunities for Small Cap and Angel Oak

-0.32

Correlation Coefficient

Small Cap  Angel Oak

Very good diversification

The 3 months correlation between Small and Angel is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Stock and Angel Oak Multi Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Angel Oak Multi and Small Cap 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 Small Cap Stock are associated (or correlated) with Angel Oak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Angel Oak Multi has no effect on the direction of Small Cap i.e., Small Cap and Angel Oak go up and down completely randomly.

Pair Corralation between Small Cap and Angel Oak

Assuming the 90 days horizon Small Cap Stock is expected to under-perform the Angel Oak. In addition to that, Small Cap is 6.7 times more volatile than Angel Oak Multi Strategy. It trades about -0.32 of its total potential returns per unit of risk. Angel Oak Multi Strategy is currently generating about 0.37 per unit of volatility. If you would invest  851.00  in Angel Oak Multi Strategy on December 4, 2024 and sell it today you would earn a total of  10.00  from holding Angel Oak Multi Strategy or generate 1.18% return on investment over 90 days.

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

Small Cap Stock  vs.  Angel Oak Multi Strategy

Small Cap Stock

Risk-Adjusted Performance

Very Weak

Over the last 90 days Small Cap Stock 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.

Angel Oak Multi

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Angel Oak Multi Strategy are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Angel 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 Small Cap and Angel Oak

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

The idea behind Small Cap Stock and Angel Oak Multi Strategy 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.