Correlation Between Oracle and SOUTHERN

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

Diversification Opportunities for Oracle and SOUTHERN

0.04
  Correlation Coefficient

Significant diversification

The 3 months correlation between Oracle and SOUTHERN is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Oracle and SOUTHERN CALIFORNIA EDISON in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOUTHERN CALIFORNIA 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 SOUTHERN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SOUTHERN CALIFORNIA has no effect on the direction of Oracle i.e., Oracle and SOUTHERN go up and down completely randomly.

Pair Corralation between Oracle and SOUTHERN

Given the investment horizon of 90 days Oracle is expected to generate 29.77 times less return on investment than SOUTHERN. But when comparing it to its historical volatility, Oracle is 41.14 times less risky than SOUTHERN. It trades about 0.1 of its potential returns per unit of risk. SOUTHERN CALIFORNIA EDISON is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  6,956  in SOUTHERN CALIFORNIA EDISON on September 5, 2024 and sell it today you would lose (635.00) from holding SOUTHERN CALIFORNIA EDISON or give up 9.13% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy64.24%
ValuesDaily Returns

Oracle  vs.  SOUTHERN CALIFORNIA EDISON

 Performance 
       Timeline  
Oracle 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Oracle are ranked lower than 15 (%) 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.
SOUTHERN CALIFORNIA 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days SOUTHERN CALIFORNIA EDISON has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for SOUTHERN CALIFORNIA EDISON investors.

Oracle and SOUTHERN Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Oracle and SOUTHERN

The main advantage of trading using opposite Oracle and SOUTHERN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oracle position performs unexpectedly, SOUTHERN 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 SOUTHERN will offset losses from the drop in SOUTHERN's long position.
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The idea behind Oracle and SOUTHERN CALIFORNIA EDISON 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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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.

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