Correlation Between Oracle and First Trust
Can any of the company-specific risk be diversified away by investing in both Oracle and First Trust 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 First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Oracle and First Trust Nasdaq, you can compare the effects of market volatilities on Oracle and First Trust 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 First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oracle and First Trust.
Diversification Opportunities for Oracle and First Trust
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Oracle and First is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Oracle and First Trust Nasdaq in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Nasdaq 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Nasdaq has no effect on the direction of Oracle i.e., Oracle and First Trust go up and down completely randomly.
Pair Corralation between Oracle and First Trust
Given the investment horizon of 90 days Oracle is expected to generate 1.41 times more return on investment than First Trust. However, Oracle is 1.41 times more volatile than First Trust Nasdaq. It trades about 0.23 of its potential returns per unit of risk. First Trust Nasdaq is currently generating about 0.13 per unit of risk. If you would invest 16,959 in Oracle on September 3, 2024 and sell it today you would earn a total of 1,525 from holding Oracle or generate 8.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Oracle vs. First Trust Nasdaq
Performance |
| Timeline |
| Oracle |
| First Trust Nasdaq |
Oracle and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Oracle and First Trust
The main advantage of trading using opposite Oracle and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oracle position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| Oracle vs. Palo Alto Networks | Oracle vs. Crowdstrike Holdings | Oracle vs. Microsoft | Oracle vs. Block Inc |
| First Trust vs. First Trust Indxx | First Trust vs. First Trust Senior | First Trust vs. First Trust AlphaDEX | First Trust vs. First Trust Indxx |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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