Correlation Between USWE SPORTS and Oracle Power

Can any of the company-specific risk be diversified away by investing in both USWE SPORTS and Oracle Power 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 USWE SPORTS and Oracle Power into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between USWE SPORTS AB and Oracle Power plc, you can compare the effects of market volatilities on USWE SPORTS and Oracle Power 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 USWE SPORTS with a short position of Oracle Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of USWE SPORTS and Oracle Power.

Diversification Opportunities for USWE SPORTS and Oracle Power

-0.09

Correlation Coefficient

USWE SPORTS  Oracle Power

Good diversification

The 3 months correlation between USWE and Oracle is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding USWE SPORTS AB and Oracle Power plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oracle Power plc and USWE SPORTS 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 USWE SPORTS AB are associated (or correlated) with Oracle Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oracle Power plc has no effect on the direction of USWE SPORTS i.e., USWE SPORTS and Oracle Power go up and down completely randomly.

Pair Corralation between USWE SPORTS and Oracle Power

Assuming the 90 days horizon USWE SPORTS is expected to generate 12.18 times less return on investment than Oracle Power. But when comparing it to its historical volatility, USWE SPORTS AB is 13.87 times less risky than Oracle Power. It trades about 0.17 of its potential returns per unit of risk. Oracle Power plc is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  0.10  in Oracle Power plc on October 24, 2024 and sell it today you would lose (0.05) from holding Oracle Power plc or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

USWE SPORTS AB  vs.  Oracle Power plc

USWE SPORTS AB

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in USWE SPORTS AB are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, USWE SPORTS reported solid returns over the last few months and may actually be approaching a breakup point.

Oracle Power plc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Oracle Power plc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Oracle Power unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with USWE SPORTS and Oracle Power

The main advantage of trading using opposite USWE SPORTS and Oracle Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if USWE SPORTS position performs unexpectedly, Oracle Power 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 Power will offset losses from the drop in Oracle Power's long position.

The idea behind USWE SPORTS AB and Oracle Power plc 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.