Correlation Between Red Oak and Vulcan Value

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

By analyzing existing cross correlation between Red Oak Technology and Vulcan Value Partners, you can compare the effects of market volatilities on Red Oak and Vulcan Value 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 Red Oak with a short position of Vulcan Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red Oak and Vulcan Value.

Diversification Opportunities for Red Oak and Vulcan Value

0.9

Correlation Coefficient

Red Oak  Vulcan Value

Almost no diversification

The 3 months correlation between Red and Vulcan is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Red Oak Technology and Vulcan Value Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Value Partners and Red 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 Red Oak Technology are associated (or correlated) with Vulcan Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vulcan Value Partners has no effect on the direction of Red Oak i.e., Red Oak and Vulcan Value go up and down completely randomly.

Pair Corralation between Red Oak and Vulcan Value

Assuming the 90 days horizon Red Oak Technology is expected to generate 0.85 times more return on investment than Vulcan Value. However, Red Oak Technology is 1.18 times less risky than Vulcan Value. It trades about 0.37 of its potential returns per unit of risk. Vulcan Value Partners is currently generating about 0.15 per unit of risk. If you would invest  4,395  in Red Oak Technology on May 3, 2025 and sell it today you would earn a total of  1,012  from holding Red Oak Technology or generate 23.03% return on investment over 90 days.

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

Red Oak Technology  vs.  Vulcan Value Partners

Red Oak Technology

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Red Oak Technology are ranked lower than 28 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Red Oak showed solid returns over the last few months and may actually be approaching a breakup point.

Vulcan Value Partners

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Value Partners are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vulcan Value may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Red Oak and Vulcan Value

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

The idea behind Red Oak Technology and Vulcan Value Partners 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 Transaction History module to view history of all your transactions and understand their impact on performance.