Correlation Between Angel Oak and Capital World

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

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

Diversification Opportunities for Angel Oak and Capital World

-0.57

Correlation Coefficient

Angel Oak  Capital World

Excellent diversification

The 3 months correlation between Angel and Capital is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Angel Oak Financial and Capital World Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital World Bond and Angel 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 Angel Oak Financial are associated (or correlated) with Capital World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital World Bond has no effect on the direction of Angel Oak i.e., Angel Oak and Capital World go up and down completely randomly.

Pair Corralation between Angel Oak and Capital World

Assuming the 90 days horizon Angel Oak Financial is expected to generate 0.56 times more return on investment than Capital World. However, Angel Oak Financial is 1.79 times less risky than Capital World. It trades about 0.11 of its potential returns per unit of risk. Capital World Bond is currently generating about -0.15 per unit of risk. If you would invest  1,397  in Angel Oak Financial on September 12, 2024 and sell it today you would earn a total of  18.00  from holding Angel Oak Financial or generate 1.29% return on investment over 90 days.

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

Angel Oak Financial  vs.  Capital World Bond

Angel Oak Financial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Angel Oak Financial are ranked lower than 8 (%) 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.

Capital World Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capital World Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Capital World is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Angel Oak and Capital World

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

The idea behind Angel Oak Financial and Capital World Bond 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.