Correlation Between Oracle and M3

Can any of the company-specific risk be diversified away by investing in both Oracle and M3 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 M3 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Oracle and M3 Inc, you can compare the effects of market volatilities on Oracle and M3 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 M3. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oracle and M3.

Diversification Opportunities for Oracle and M3

-0.23

Correlation Coefficient

Oracle  M3

Very good diversification

The 3 months correlation between Oracle and M3 is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Oracle and M3 Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M3 Inc 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 M3. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of M3 Inc has no effect on the direction of Oracle i.e., Oracle and M3 go up and down completely randomly.

Pair Corralation between Oracle and M3

Given the investment horizon of 90 days Oracle is expected to under-perform the M3. In addition to that, Oracle is 1.28 times more volatile than M3 Inc. It trades about -0.05 of its total potential returns per unit of risk. M3 Inc is currently generating about -0.01 per unit of volatility. If you would invest  973.00  in M3 Inc on December 27, 2024 and sell it today you would lose (28.00) from holding M3 Inc or give up 2.88% of portfolio value over 90 days.

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

Oracle  vs.  M3 Inc

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.

M3 Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days M3 Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, M3 is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Oracle and M3

The main advantage of trading using opposite Oracle and M3 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oracle position performs unexpectedly, M3 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 M3 will offset losses from the drop in M3's long position.

The idea behind Oracle and M3 Inc 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.