Correlation Between Oracle Financial and Xchanging Solutions

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

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

Diversification Opportunities for Oracle Financial and Xchanging Solutions

0.27

Correlation Coefficient

Oracle Financial  Xchanging Solutions

Modest diversification

The 3 months correlation between Oracle and Xchanging is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Oracle Financial Services and Xchanging Solutions Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xchanging Solutions and Oracle Financial 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 Financial Services are associated (or correlated) with Xchanging Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xchanging Solutions has no effect on the direction of Oracle Financial i.e., Oracle Financial and Xchanging Solutions go up and down completely randomly.

Pair Corralation between Oracle Financial and Xchanging Solutions

Assuming the 90 days trading horizon Oracle Financial Services is expected to under-perform the Xchanging Solutions. But the stock apears to be less risky and, when comparing its historical volatility, Oracle Financial Services is 1.49 times less risky than Xchanging Solutions. The stock trades about -0.13 of its potential returns per unit of risk. The Xchanging Solutions Limited is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  11,388  in Xchanging Solutions Limited on October 8, 2024 and sell it today you would lose (336.00) from holding Xchanging Solutions Limited or give up 2.95% of portfolio value over 90 days.

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

Oracle Financial Services  vs.  Xchanging Solutions Limited

Oracle Financial Services

Risk-Adjusted Performance

4 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Oracle Financial Services are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Oracle Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Xchanging Solutions

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Xchanging Solutions Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, Xchanging Solutions is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Oracle Financial and Xchanging Solutions

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

The idea behind Oracle Financial Services and Xchanging Solutions Limited 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .