Correlation Between Oracle and Clean Air

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

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

Diversification Opportunities for Oracle and Clean Air

0.35

Correlation Coefficient

Oracle  Clean Air

Weak diversification

The 3 months correlation between Oracle and Clean is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Oracle and Clean Air Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clean Air Metals 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 Clean Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clean Air Metals has no effect on the direction of Oracle i.e., Oracle and Clean Air go up and down completely randomly.

Pair Corralation between Oracle and Clean Air

Given the investment horizon of 90 days Oracle is expected to generate 1.18 times less return on investment than Clean Air. But when comparing it to its historical volatility, Oracle is 3.25 times less risky than Clean Air. It trades about 0.08 of its potential returns per unit of risk. Clean Air Metals is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  4.60  in Clean Air Metals on December 2, 2024 and sell it today you would lose (0.90) from holding Clean Air Metals or give up 19.57% of portfolio value over 90 days.

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

Oracle  vs.  Clean Air Metals

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.

Clean Air Metals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Clean Air Metals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Clean Air may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Oracle and Clean Air

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

The idea behind Oracle and Clean Air Metals 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.