Correlation Between Oracle and HSBC SP

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

By analyzing existing cross correlation between Oracle and HSBC SP 500, you can compare the effects of market volatilities on Oracle and HSBC SP 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 HSBC SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oracle and HSBC SP.

Diversification Opportunities for Oracle and HSBC SP

0.91

Correlation Coefficient

Oracle  HSBC SP

Almost no diversification

The 3 months correlation between Oracle and HSBC is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Oracle and HSBC SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HSBC SP 500 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 HSBC SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HSBC SP 500 has no effect on the direction of Oracle i.e., Oracle and HSBC SP go up and down completely randomly.

Pair Corralation between Oracle and HSBC SP

Given the investment horizon of 90 days Oracle is expected to generate 2.62 times more return on investment than HSBC SP. However, Oracle is 2.62 times more volatile than HSBC SP 500. It trades about 0.09 of its potential returns per unit of risk. HSBC SP 500 is currently generating about 0.12 per unit of risk. If you would invest  7,832  in Oracle on September 12, 2024 and sell it today you would earn a total of  9,942  from holding Oracle or generate 126.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.6%
Values	Daily Returns

Oracle  vs.  HSBC SP 500

Oracle

Risk-Adjusted Performance

7 of 100

OK

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

HSBC SP 500

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in HSBC SP 500 are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, HSBC SP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Oracle and HSBC SP

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

The idea behind Oracle and HSBC SP 500 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.