Correlation Between Live Oak and Tekla Healthcare

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

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

Diversification Opportunities for Live Oak and Tekla Healthcare

0.36

Correlation Coefficient

Live Oak  Tekla Healthcare

Weak diversification

The 3 months correlation between Live and Tekla is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Live Oak Health and Tekla Healthcare Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tekla Healthcare Opp and Live 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 Live Oak Health are associated (or correlated) with Tekla Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tekla Healthcare Opp has no effect on the direction of Live Oak i.e., Live Oak and Tekla Healthcare go up and down completely randomly.

Pair Corralation between Live Oak and Tekla Healthcare

Assuming the 90 days horizon Live Oak Health is expected to generate 0.64 times more return on investment than Tekla Healthcare. However, Live Oak Health is 1.56 times less risky than Tekla Healthcare. It trades about 0.1 of its potential returns per unit of risk. Tekla Healthcare Opportunities is currently generating about 0.03 per unit of risk. If you would invest  2,168  in Live Oak Health on September 1, 2024 and sell it today you would earn a total of  44.00  from holding Live Oak Health or generate 2.03% return on investment over 90 days.

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

Live Oak Health  vs.  Tekla Healthcare Opportunities

Live Oak Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Live Oak Health has generated negative risk-adjusted returns adding no value to fund investors. 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.

Tekla Healthcare Opp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tekla Healthcare Opportunities has generated negative risk-adjusted returns adding no value to fund investors. Even with relatively invariable technical indicators, Tekla Healthcare is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Live Oak and Tekla Healthcare

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

The idea behind Live Oak Health and Tekla Healthcare Opportunities 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..