Correlation Between Oracle and BCN

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

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

Diversification Opportunities for Oracle and BCN

-0.03

Correlation Coefficient

Oracle  BCN

Good diversification

The 3 months correlation between Oracle and BCN is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Oracle and BCN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCN 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 BCN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BCN has no effect on the direction of Oracle i.e., Oracle and BCN go up and down completely randomly.

Pair Corralation between Oracle and BCN

Given the investment horizon of 90 days Oracle is expected to under-perform the BCN. But the stock apears to be less risky and, when comparing its historical volatility, Oracle is 31.45 times less risky than BCN. The stock trades about -0.03 of its potential returns per unit of risk. The BCN is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  0.00  in BCN on December 2, 2024 and sell it today you would earn a total of  0.00  from holding BCN or generate 36.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.85%
Values	Daily Returns

Oracle  vs.  BCN

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 quite persistent fundamental indicators, Oracle is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

BCN

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BCN are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, BCN exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Oracle and BCN

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

The idea behind Oracle and BCN 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.