Correlation Between Oracle and Impact Coatings

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

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

Diversification Opportunities for Oracle and Impact Coatings

0.72

Correlation Coefficient

Oracle  Impact Coatings

Poor diversification

The 3 months correlation between Oracle and Impact is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Oracle and Impact Coatings publ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Impact Coatings publ 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 Impact Coatings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Impact Coatings publ has no effect on the direction of Oracle i.e., Oracle and Impact Coatings go up and down completely randomly.

Pair Corralation between Oracle and Impact Coatings

Given the investment horizon of 90 days Oracle is expected to under-perform the Impact Coatings. But the stock apears to be less risky and, when comparing its historical volatility, Oracle is 1.1 times less risky than Impact Coatings. The stock trades about -0.05 of its potential returns per unit of risk. The Impact Coatings publ is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  410.00  in Impact Coatings publ on December 29, 2024 and sell it today you would lose (52.00) from holding Impact Coatings publ or give up 12.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Oracle  vs.  Impact Coatings publ

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.

Impact Coatings publ

Risk-Adjusted Performance

Very Weak

Over the last 90 days Impact Coatings publ has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Oracle and Impact Coatings

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

The idea behind Oracle and Impact Coatings publ 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.