Correlation Between Oracle and Jeju Beer

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

By analyzing existing cross correlation between Oracle and Jeju Beer Co, you can compare the effects of market volatilities on Oracle and Jeju Beer 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 Jeju Beer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oracle and Jeju Beer.

Diversification Opportunities for Oracle and Jeju Beer

-0.57

Correlation Coefficient

Oracle  Jeju Beer

Excellent diversification

The 3 months correlation between Oracle and Jeju is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Oracle and Jeju Beer Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jeju Beer 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 Jeju Beer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jeju Beer has no effect on the direction of Oracle i.e., Oracle and Jeju Beer go up and down completely randomly.

Pair Corralation between Oracle and Jeju Beer

Given the investment horizon of 90 days Oracle is expected to generate 0.51 times more return on investment than Jeju Beer. However, Oracle is 1.95 times less risky than Jeju Beer. It trades about 0.2 of its potential returns per unit of risk. Jeju Beer Co is currently generating about 0.06 per unit of risk. If you would invest  14,043  in Oracle on September 4, 2024 and sell it today you would earn a total of  4,098  from holding Oracle or generate 29.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	93.65%
Values	Daily Returns

Oracle  vs.  Jeju Beer Co

Oracle

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Oracle are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal fundamental indicators, Oracle disclosed solid returns over the last few months and may actually be approaching a breakup point.

Jeju Beer

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Jeju Beer Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jeju Beer sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Oracle and Jeju Beer

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

The idea behind Oracle and Jeju Beer Co 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.