Correlation Between Small Capitalization and Live Oak

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

By analyzing existing cross correlation between Small Capitalization Portfolio and Live Oak Health, you can compare the effects of market volatilities on Small Capitalization and Live 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 Small Capitalization with a short position of Live Oak. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Capitalization and Live Oak.

Diversification Opportunities for Small Capitalization and Live Oak

0.42

Correlation Coefficient

Small Capitalization  Live Oak

Very weak diversification

The 3 months correlation between Small and Live is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Small Capitalization Portfolio and Live Oak Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Live Oak Health and Small Capitalization 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 Small Capitalization Portfolio are associated (or correlated) with Live Oak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Live Oak Health has no effect on the direction of Small Capitalization i.e., Small Capitalization and Live Oak go up and down completely randomly.

Pair Corralation between Small Capitalization and Live Oak

Assuming the 90 days horizon Small Capitalization Portfolio is expected to generate 1.06 times more return on investment than Live Oak. However, Small Capitalization is 1.06 times more volatile than Live Oak Health. It trades about 0.14 of its potential returns per unit of risk. Live Oak Health is currently generating about 0.0 per unit of risk. If you would invest  643.00  in Small Capitalization Portfolio on May 2, 2025 and sell it today you would earn a total of  58.00  from holding Small Capitalization Portfolio or generate 9.02% return on investment over 90 days.

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

Small Capitalization Portfolio  vs.  Live Oak Health

Small Capitalization

Risk-Adjusted Performance

Good

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

Live Oak Health

Risk-Adjusted Performance

Very Weak

Over the last 90 days Live Oak Health has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Live 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 Small Capitalization and Live Oak

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

The idea behind Small Capitalization Portfolio and Live Oak Health 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.