Correlation Between Magazine Luiza and Oracle

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

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

Diversification Opportunities for Magazine Luiza and Oracle

-0.64

Correlation Coefficient

Magazine Luiza  Oracle

Excellent diversification

The 3 months correlation between Magazine and Oracle is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Magazine Luiza SA and Oracle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oracle and Magazine Luiza 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 Magazine Luiza SA are associated (or correlated) with Oracle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oracle has no effect on the direction of Magazine Luiza i.e., Magazine Luiza and Oracle go up and down completely randomly.

Pair Corralation between Magazine Luiza and Oracle

Assuming the 90 days trading horizon Magazine Luiza SA is expected to generate 1.38 times more return on investment than Oracle. However, Magazine Luiza is 1.38 times more volatile than Oracle. It trades about 0.19 of its potential returns per unit of risk. Oracle is currently generating about -0.07 per unit of risk. If you would invest  653.00  in Magazine Luiza SA on December 25, 2024 and sell it today you would earn a total of  368.00  from holding Magazine Luiza SA or generate 56.36% return on investment over 90 days.

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

Magazine Luiza SA  vs.  Oracle

Magazine Luiza SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Magazine Luiza SA are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Magazine Luiza unveiled solid returns over the last few months and may actually be approaching a breakup point.

Oracle

Risk-Adjusted Performance

Very Weak

Over the last 90 days Oracle has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Magazine Luiza and Oracle

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

The idea behind Magazine Luiza SA and Oracle 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..