Correlation Between Oracle and Aura Biosciences

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

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

Diversification Opportunities for Oracle and Aura Biosciences

0.47

Correlation Coefficient

Oracle  Aura Biosciences

Very weak diversification

The 3 months correlation between Oracle and Aura is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Oracle and Aura Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aura Biosciences 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 Aura Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aura Biosciences has no effect on the direction of Oracle i.e., Oracle and Aura Biosciences go up and down completely randomly.

Pair Corralation between Oracle and Aura Biosciences

Given the investment horizon of 90 days Oracle is expected to generate 1.65 times more return on investment than Aura Biosciences. However, Oracle is 1.65 times more volatile than Aura Biosciences. It trades about -0.04 of its potential returns per unit of risk. Aura Biosciences is currently generating about -0.09 per unit of risk. If you would invest  17,124  in Oracle on December 25, 2024 and sell it today you would lose (1,637) from holding Oracle or give up 9.56% of portfolio value over 90 days.

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

Oracle  vs.  Aura Biosciences

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 latest abnormal performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Aura Biosciences

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aura Biosciences has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Oracle and Aura Biosciences

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

The idea behind Oracle and Aura Biosciences 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.