Correlation Between Oracle and Human Xtensions

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

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

Diversification Opportunities for Oracle and Human Xtensions

0.39

Correlation Coefficient

Oracle  Human Xtensions

Weak diversification

The 3 months correlation between Oracle and Human is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Oracle and Human Xtensions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Human Xtensions 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 Human Xtensions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Human Xtensions has no effect on the direction of Oracle i.e., Oracle and Human Xtensions go up and down completely randomly.

Pair Corralation between Oracle and Human Xtensions

Given the investment horizon of 90 days Oracle is expected to under-perform the Human Xtensions. But the stock apears to be less risky and, when comparing its historical volatility, Oracle is 2.1 times less risky than Human Xtensions. The stock trades about -0.05 of its potential returns per unit of risk. The Human Xtensions is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  3,040  in Human Xtensions on December 29, 2024 and sell it today you would lose (300.00) from holding Human Xtensions or give up 9.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	85.25%
Values	Daily Returns

Oracle  vs.  Human Xtensions

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.

Human Xtensions

Risk-Adjusted Performance

Very Weak

Over the last 90 days Human Xtensions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Human Xtensions is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Oracle and Human Xtensions

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

The idea behind Oracle and Human Xtensions 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.