Correlation Between Oracle and Ford

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

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

Diversification Opportunities for Oracle and Ford

0.46

Correlation Coefficient

Oracle  Ford

Very weak diversification

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

Pair Corralation between Oracle and Ford

Given the investment horizon of 90 days Oracle is expected to generate 1.25 times more return on investment than Ford. However, Oracle is 1.25 times more volatile than Ford Motor. It trades about 0.22 of its potential returns per unit of risk. Ford Motor is currently generating about 0.09 per unit of risk. If you would invest  13,919  in Oracle on September 3, 2024 and sell it today you would earn a total of  4,565  from holding Oracle or generate 32.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Oracle  vs.  Ford Motor

Oracle

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Oracle are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal fundamental indicators, Oracle disclosed solid returns over the last few months and may actually be approaching a breakup point.

Ford Motor

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Ford may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Oracle and Ford

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

The idea behind Oracle and Ford Motor 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 Global Correlations module to find global opportunities by holding instruments from different markets.