Can any of the company-specific risk be diversified away by investing in both Oaktree Specialty and American Express 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 Oaktree Specialty and American Express into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Oaktree Specialty Lending and American Express, you can compare the effects of market volatilities on Oaktree Specialty and American Express 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 Oaktree Specialty with a short position of American Express. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oaktree Specialty and American Express.
Diversification Opportunities for Oaktree Specialty and American Express
The 3 months correlation between Oaktree and American is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Oaktree Specialty Lending and American Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Express and Oaktree Specialty 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 Oaktree Specialty Lending are associated (or correlated) with American Express. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Express has no effect on the direction of Oaktree Specialty i.e., Oaktree Specialty and American Express go up and down completely randomly.
Pair Corralation between Oaktree Specialty and American Express
Given the investment horizon of 90 days Oaktree Specialty Lending is expected to generate 0.68 times more return on investment than American Express. However, Oaktree Specialty Lending is 1.47 times less risky than American Express. It trades about 0.15 of its potential returns per unit of risk. American Express is currently generating about 0.06 per unit of risk. If you would invest 1,920 in Oaktree Specialty Lending on March 6, 2024 and sell it today you would earn a total of 38.50 from holding Oaktree Specialty Lending or generate 2.01% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in Oaktree Specialty Lending are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Oaktree Specialty is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.
Compared to the overall equity markets, risk-adjusted returns on investments in American Express are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, American Express may actually be approaching a critical reversion point that can send shares even higher in July 2024.