Correlation Between Oracle and American Aires

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

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

Diversification Opportunities for Oracle and American Aires

0.46

Correlation Coefficient

Oracle  American Aires

Very weak diversification

The 3 months correlation between Oracle and American is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Oracle and American Aires in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Aires 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 American Aires. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Aires has no effect on the direction of Oracle i.e., Oracle and American Aires go up and down completely randomly.

Pair Corralation between Oracle and American Aires

Given the investment horizon of 90 days Oracle is expected to under-perform the American Aires. But the stock apears to be less risky and, when comparing its historical volatility, Oracle is 2.25 times less risky than American Aires. The stock trades about -0.07 of its potential returns per unit of risk. The American Aires is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  13.00  in American Aires on December 29, 2024 and sell it today you would earn a total of  0.00  from holding American Aires or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.83%
Values	Daily Returns

Oracle  vs.  American Aires

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 abnormal performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

American Aires

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in American Aires are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, American Aires reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Oracle and American Aires

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

The idea behind Oracle and American Aires 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.