Correlation Between Oracle and Haier Smart

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

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

Diversification Opportunities for Oracle and Haier Smart

0.04

Correlation Coefficient

Oracle  Haier Smart

Significant diversification

The 3 months correlation between Oracle and Haier is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Oracle and Haier Smart Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Haier Smart Home 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 Haier Smart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Haier Smart Home has no effect on the direction of Oracle i.e., Oracle and Haier Smart go up and down completely randomly.

Pair Corralation between Oracle and Haier Smart

Given the investment horizon of 90 days Oracle is expected to generate 1.05 times more return on investment than Haier Smart. However, Oracle is 1.05 times more volatile than Haier Smart Home. It trades about -0.04 of its potential returns per unit of risk. Haier Smart Home is currently generating about -0.06 per unit of risk. If you would invest  17,006  in Oracle on December 2, 2024 and sell it today you would lose (400.00) from holding Oracle or give up 2.35% of portfolio value over 90 days.

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

Oracle  vs.  Haier Smart Home

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.

Haier Smart Home

Risk-Adjusted Performance

Very Weak

Over the last 90 days Haier Smart Home has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, Haier Smart is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Oracle and Haier Smart

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

The idea behind Oracle and Haier Smart Home 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.