Correlation Between Angel Oak and Gmo High

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

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

Diversification Opportunities for Angel Oak and Gmo High

0.2

Correlation Coefficient

Angel Oak  Gmo High

Modest diversification

The 3 months correlation between Angel and Gmo is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Angel Oak Financial and Gmo High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo High Yield and Angel 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 Angel Oak Financial are associated (or correlated) with Gmo High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo High Yield has no effect on the direction of Angel Oak i.e., Angel Oak and Gmo High go up and down completely randomly.

Pair Corralation between Angel Oak and Gmo High

Assuming the 90 days horizon Angel Oak Financial is expected to generate 0.12 times more return on investment than Gmo High. However, Angel Oak Financial is 8.56 times less risky than Gmo High. It trades about -0.09 of its potential returns per unit of risk. Gmo High Yield is currently generating about -0.23 per unit of risk. If you would invest  1,414  in Angel Oak Financial on October 6, 2024 and sell it today you would lose (5.00) from holding Angel Oak Financial or give up 0.35% of portfolio value over 90 days.

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

Angel Oak Financial  vs.  Gmo High Yield

Angel Oak Financial

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Angel Oak Financial are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Angel Oak is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Gmo High Yield

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gmo High Yield 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 Angel Oak and Gmo High

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

The idea behind Angel Oak Financial and Gmo High Yield 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.