Correlation Between Apple and Oracle
Can any of the company-specific risk be diversified away by investing in both Apple and Oracle 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 Apple and Oracle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and Oracle, you can compare the effects of market volatilities on Apple and Oracle 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 Apple with a short position of Oracle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Oracle.
Diversification Opportunities for Apple and Oracle
Poor diversification
The 3 months correlation between Apple and Oracle is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Oracle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oracle and Apple 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 Apple Inc are associated (or correlated) with Oracle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oracle has no effect on the direction of Apple i.e., Apple and Oracle go up and down completely randomly.
Pair Corralation between Apple and Oracle
Assuming the 90 days trading horizon Apple is expected to generate 2.19 times less return on investment than Oracle. But when comparing it to its historical volatility, Apple Inc is 1.79 times less risky than Oracle. It trades about 0.14 of its potential returns per unit of risk. Oracle is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 16,086 in Oracle on August 30, 2024 and sell it today you would earn a total of 1,494 from holding Oracle or generate 9.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Apple Inc vs. Oracle
Performance |
| Timeline |
| Apple Inc |
| Oracle |
Apple and Oracle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and Oracle
The main advantage of trading using opposite Apple and Oracle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, Oracle 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 Oracle will offset losses from the drop in Oracle's long position.| Apple vs. UMC Electronics Co | Apple vs. BW OFFSHORE LTD | Apple vs. BYD ELECTRONIC | Apple vs. United Rentals |
Check out your portfolio center.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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
Other Complementary Tools
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings |