Correlation Between Oracle and Ariel Appreciation

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

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

Diversification Opportunities for Oracle and Ariel Appreciation

0.45

Correlation Coefficient

Oracle  Ariel Appreciation

Very weak diversification

The 3 months correlation between Oracle and Ariel is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Oracle and Ariel Appreciation Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ariel Appreciation 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 Ariel Appreciation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ariel Appreciation has no effect on the direction of Oracle i.e., Oracle and Ariel Appreciation go up and down completely randomly.

Pair Corralation between Oracle and Ariel Appreciation

Given the investment horizon of 90 days Oracle is expected to generate 2.21 times more return on investment than Ariel Appreciation. However, Oracle is 2.21 times more volatile than Ariel Appreciation Fund. It trades about -0.03 of its potential returns per unit of risk. Ariel Appreciation Fund is currently generating about -0.16 per unit of risk. If you would invest  18,094  in Oracle on December 2, 2024 and sell it today you would lose (1,488) from holding Oracle or give up 8.22% of portfolio value over 90 days.

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

Oracle  vs.  Ariel Appreciation Fund

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.

Ariel Appreciation

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ariel Appreciation Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Oracle and Ariel Appreciation

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

The idea behind Oracle and Ariel Appreciation Fund 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.