Correlation Between Angel Oak and Massachusetts Investors

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

Diversification Opportunities for Angel Oak and Massachusetts Investors

0.7

Correlation Coefficient

Angel Oak  Massachusetts Investors

Poor diversification

The 3 months correlation between Angel and Massachusetts is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Angel Oak Financial and Massachusetts Investors Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Massachusetts Investors 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 Massachusetts Investors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Massachusetts Investors has no effect on the direction of Angel Oak i.e., Angel Oak and Massachusetts Investors go up and down completely randomly.

Pair Corralation between Angel Oak and Massachusetts Investors

Assuming the 90 days horizon Angel Oak is expected to generate 3.35 times less return on investment than Massachusetts Investors. But when comparing it to its historical volatility, Angel Oak Financial is 3.5 times less risky than Massachusetts Investors. It trades about 0.15 of its potential returns per unit of risk. Massachusetts Investors Growth is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  4,630  in Massachusetts Investors Growth on September 3, 2024 and sell it today you would earn a total of  280.00  from holding Massachusetts Investors Growth or generate 6.05% return on investment over 90 days.

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

Angel Oak Financial  vs.  Massachusetts Investors Growth

Angel Oak Financial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Angel Oak Financial are ranked lower than 11 (%) 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.

Massachusetts Investors

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Massachusetts Investors Growth are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Massachusetts Investors is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Angel Oak and Massachusetts Investors

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

The idea behind Angel Oak Financial and Massachusetts Investors Growth 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.