Correlation Between Oracle and GDS Holdings

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

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

Diversification Opportunities for Oracle and GDS Holdings

-0.05

Correlation Coefficient

Oracle  GDS Holdings

Good diversification

The 3 months correlation between Oracle and GDS is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Oracle and GDS Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GDS Holdings 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 GDS Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GDS Holdings has no effect on the direction of Oracle i.e., Oracle and GDS Holdings go up and down completely randomly.

Pair Corralation between Oracle and GDS Holdings

Given the investment horizon of 90 days Oracle is expected to under-perform the GDS Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Oracle is 2.27 times less risky than GDS Holdings. The stock trades about -0.06 of its potential returns per unit of risk. The GDS Holdings is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,065  in GDS Holdings on December 26, 2024 and sell it today you would earn a total of  672.00  from holding GDS Holdings or generate 32.54% return on investment over 90 days.

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

Oracle  vs.  GDS Holdings

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.

GDS Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GDS Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady fundamental indicators, GDS Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Oracle and GDS Holdings

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

The idea behind Oracle and GDS Holdings 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.