Correlation Between Tri Continental and Oaktree Capital

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

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

Diversification Opportunities for Tri Continental and Oaktree Capital

0.75

Correlation Coefficient

Tri Continental  Oaktree Capital

Poor diversification

The 3 months correlation between Tri and Oaktree is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Tri Continental PFD and Oaktree Capital Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oaktree Capital Group and Tri Continental 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 Tri Continental PFD are associated (or correlated) with Oaktree Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oaktree Capital Group has no effect on the direction of Tri Continental i.e., Tri Continental and Oaktree Capital go up and down completely randomly.

Pair Corralation between Tri Continental and Oaktree Capital

Given the investment horizon of 90 days Tri Continental PFD is expected to under-perform the Oaktree Capital. But the preferred stock apears to be less risky and, when comparing its historical volatility, Tri Continental PFD is 1.57 times less risky than Oaktree Capital. The preferred stock trades about -0.14 of its potential returns per unit of risk. The Oaktree Capital Group is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  2,304  in Oaktree Capital Group on September 12, 2024 and sell it today you would lose (62.00) from holding Oaktree Capital Group or give up 2.69% of portfolio value over 90 days.

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

Tri Continental PFD  vs.  Oaktree Capital Group

Tri Continental PFD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tri Continental PFD has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Tri Continental is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

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 latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Tri Continental and Oaktree Capital

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

The idea behind Tri Continental PFD and Oaktree Capital Group 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.