Correlation Between Ford and Oracle Financial

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

By analyzing existing cross correlation between Ford Motor and Oracle Financial Services, you can compare the effects of market volatilities on Ford and Oracle Financial 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 Ford with a short position of Oracle Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Oracle Financial.

Diversification Opportunities for Ford and Oracle Financial

-0.43

Correlation Coefficient

Ford  Oracle Financial

Very good diversification

The 3 months correlation between Ford and Oracle is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Oracle Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oracle Financial Services and Ford 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 Ford Motor are associated (or correlated) with Oracle Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oracle Financial Services has no effect on the direction of Ford i.e., Ford and Oracle Financial go up and down completely randomly.

Pair Corralation between Ford and Oracle Financial

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Oracle Financial. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.2 times less risky than Oracle Financial. The stock trades about -0.22 of its potential returns per unit of risk. The Oracle Financial Services is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  1,257,510  in Oracle Financial Services on October 9, 2024 and sell it today you would lose (57,395) from holding Oracle Financial Services or give up 4.56% of portfolio value over 90 days.

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

Ford Motor  vs.  Oracle Financial Services

Ford Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Ford is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Oracle Financial Services

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Oracle Financial Services are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Oracle Financial is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ford and Oracle Financial

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

The idea behind Ford Motor and Oracle Financial Services 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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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.