Correlation Between Oracle and E M

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Can any of the company-specific risk be diversified away by investing in both Oracle and E M 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 Oracle and E M into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Oracle and E M Computing, you can compare the effects of market volatilities on Oracle and E M 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 Oracle with a short position of E M. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oracle and E M.

Diversification Opportunities for Oracle and E M

-0.24
  Correlation Coefficient

Very good diversification

The 3 months correlation between Oracle and EMCO is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Oracle and E M Computing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E M Computing and Oracle 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 Oracle are associated (or correlated) with E M. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E M Computing has no effect on the direction of Oracle i.e., Oracle and E M go up and down completely randomly.

Pair Corralation between Oracle and E M

Given the investment horizon of 90 days Oracle is expected to generate 0.86 times more return on investment than E M. However, Oracle is 1.16 times less risky than E M. It trades about 0.07 of its potential returns per unit of risk. E M Computing is currently generating about 0.01 per unit of risk. If you would invest  11,971  in Oracle on September 12, 2024 and sell it today you would earn a total of  7,074  from holding Oracle or generate 59.09% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy78.02%
ValuesDaily Returns

Oracle  vs.  E M Computing

 Performance 
       Timeline  
Oracle 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Oracle are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal fundamental indicators, Oracle disclosed solid returns over the last few months and may actually be approaching a breakup point.
E M Computing 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in E M Computing are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, E M sustained solid returns over the last few months and may actually be approaching a breakup point.

Oracle and E M Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Oracle and E M

The main advantage of trading using opposite Oracle and E M positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oracle position performs unexpectedly, E M 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 E M will offset losses from the drop in E M's long position.
The idea behind Oracle and E M Computing 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.
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.

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