Correlation Between Rivernorthoaktree and Rivernorth

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

By analyzing existing cross correlation between Rivernorthoaktree High Income and Rivernorth E Opportunity, you can compare the effects of market volatilities on Rivernorthoaktree and Rivernorth 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 Rivernorthoaktree with a short position of Rivernorth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rivernorthoaktree and Rivernorth.

Diversification Opportunities for Rivernorthoaktree and Rivernorth

0.94

Correlation Coefficient

Rivernorthoaktree  Rivernorth

Almost no diversification

The 3 months correlation between Rivernorthoaktree and Rivernorth is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Rivernorthoaktree High Income and Rivernorth E Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rivernorth E Opportunity and Rivernorthoaktree 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 Rivernorthoaktree High Income are associated (or correlated) with Rivernorth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rivernorth E Opportunity has no effect on the direction of Rivernorthoaktree i.e., Rivernorthoaktree and Rivernorth go up and down completely randomly.

Pair Corralation between Rivernorthoaktree and Rivernorth

Assuming the 90 days horizon Rivernorthoaktree is expected to generate 1.93 times less return on investment than Rivernorth. But when comparing it to its historical volatility, Rivernorthoaktree High Income is 2.47 times less risky than Rivernorth. It trades about 0.04 of its potential returns per unit of risk. Rivernorth E Opportunity is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  731.00  in Rivernorth E Opportunity on February 5, 2024 and sell it today you would earn a total of  3.00  from holding Rivernorth E Opportunity or generate 0.41% return on investment over 90 days.

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

Rivernorthoaktree High Income  vs.  Rivernorth E Opportunity

Rivernorthoaktree High

Risk-Adjusted Performance

11 of 100

Good

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

Rivernorth E Opportunity

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rivernorth E Opportunity are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Rivernorth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Rivernorthoaktree and Rivernorth

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

The idea behind Rivernorthoaktree High Income and Rivernorth E Opportunity 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.