Correlation Between Oracle and HSBC UK

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

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

Diversification Opportunities for Oracle and HSBC UK

0.31

Correlation Coefficient

Oracle  HSBC UK

Weak diversification

The 3 months correlation between Oracle and HSBC is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Oracle and HSBC UK SUS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HSBC UK SUS 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 UK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HSBC UK SUS has no effect on the direction of Oracle i.e., Oracle and HSBC UK go up and down completely randomly.

Pair Corralation between Oracle and HSBC UK

Given the investment horizon of 90 days Oracle is expected to under-perform the HSBC UK. In addition to that, Oracle is 3.54 times more volatile than HSBC UK SUS. It trades about -0.04 of its total potential returns per unit of risk. HSBC UK SUS is currently generating about 0.24 per unit of volatility. If you would invest  2,288  in HSBC UK SUS on December 2, 2024 and sell it today you would earn a total of  74.00  from holding HSBC UK SUS or generate 3.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Oracle  vs.  HSBC UK SUS

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.

HSBC UK SUS

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HSBC UK SUS are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HSBC UK may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Oracle and HSBC UK

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

The idea behind Oracle and HSBC UK SUS 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.