Correlation Between Oaktree Capital and State Street

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

By analyzing existing cross correlation between Oaktree Capital Group and State Street, you can compare the effects of market volatilities on Oaktree Capital and State Street 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 Oaktree Capital with a short position of State Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oaktree Capital and State Street.

Diversification Opportunities for Oaktree Capital and State Street

0.52

Correlation Coefficient

Oaktree Capital  State Street

Very weak diversification

The 3 months correlation between Oaktree and State is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Oaktree Capital Group and State Street in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street and Oaktree Capital 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 Oaktree Capital Group are associated (or correlated) with State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street has no effect on the direction of Oaktree Capital i.e., Oaktree Capital and State Street go up and down completely randomly.

Pair Corralation between Oaktree Capital and State Street

Assuming the 90 days trading horizon Oaktree Capital Group is expected to generate 1.99 times more return on investment than State Street. However, Oaktree Capital is 1.99 times more volatile than State Street. It trades about 0.05 of its potential returns per unit of risk. State Street is currently generating about 0.09 per unit of risk. If you would invest  1,985  in Oaktree Capital Group on September 4, 2024 and sell it today you would earn a total of  225.00  from holding Oaktree Capital Group or generate 11.34% return on investment over 90 days.

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

Oaktree Capital Group  vs.  State Street

Oaktree Capital Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oaktree Capital Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward-looking signals, Oaktree Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

State Street

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in State Street are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, State Street is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Oaktree Capital and State Street

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

The idea behind Oaktree Capital Group and State Street 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.