Correlation Between Dynamic Allocation and Angel Oak

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

By analyzing existing cross correlation between Dynamic Allocation Fund and Angel Oak Ultrashort, you can compare the effects of market volatilities on Dynamic Allocation and Angel Oak 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 Dynamic Allocation with a short position of Angel Oak. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dynamic Allocation and Angel Oak.

Diversification Opportunities for Dynamic Allocation and Angel Oak

0.67

Correlation Coefficient

Dynamic Allocation  Angel Oak

Poor diversification

The 3 months correlation between Dynamic and Angel is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Dynamic Allocation Fund and Angel Oak Ultrashort in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Angel Oak Ultrashort and Dynamic Allocation 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 Dynamic Allocation Fund are associated (or correlated) with Angel Oak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Angel Oak Ultrashort has no effect on the direction of Dynamic Allocation i.e., Dynamic Allocation and Angel Oak go up and down completely randomly.

Pair Corralation between Dynamic Allocation and Angel Oak

Assuming the 90 days horizon Dynamic Allocation Fund is expected to generate 5.02 times more return on investment than Angel Oak. However, Dynamic Allocation is 5.02 times more volatile than Angel Oak Ultrashort. It trades about 0.16 of its potential returns per unit of risk. Angel Oak Ultrashort is currently generating about 0.14 per unit of risk. If you would invest  1,039  in Dynamic Allocation Fund on September 5, 2024 and sell it today you would earn a total of  51.00  from holding Dynamic Allocation Fund or generate 4.91% return on investment over 90 days.

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

Dynamic Allocation Fund  vs.  Angel Oak Ultrashort

Dynamic Allocation

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dynamic Allocation Fund are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Dynamic Allocation is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Angel Oak Ultrashort

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Angel Oak Ultrashort are ranked lower than 10 (%) 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.

Pair Trading with Dynamic Allocation and Angel Oak

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

The idea behind Dynamic Allocation Fund and Angel Oak Ultrashort 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.