Correlation Between Oracle and Oracle Power

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

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

Diversification Opportunities for Oracle and Oracle Power

-0.31

Correlation Coefficient

Oracle  Oracle Power

Very good diversification

The 3 months correlation between Oracle and Oracle is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Oracle 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 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 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 Oracle i.e., Oracle and Oracle Power go up and down completely randomly.

Pair Corralation between Oracle and Oracle Power

Assuming the 90 days horizon Oracle is expected to under-perform the Oracle Power. But the stock apears to be less risky and, when comparing its historical volatility, Oracle is 16.82 times less risky than Oracle Power. The stock trades about -0.32 of its potential returns per unit of risk. The Oracle Power plc is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  0.05  in Oracle Power plc on October 7, 2024 and sell it today you would earn a total of  0.05  from holding Oracle Power plc or generate 100.0% return on investment over 90 days.

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

Oracle  vs.  Oracle Power plc

Oracle

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Oracle are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Oracle is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Oracle Power plc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Oracle Power plc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Oracle Power unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Oracle and Oracle Power

The main advantage of trading using opposite Oracle and Oracle Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oracle 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 Oracle 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.

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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.