Correlation Between Oracle and News

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

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

Diversification Opportunities for Oracle and News

0.67

Correlation Coefficient

Oracle  News

Poor diversification

The 3 months correlation between Oracle and News is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Oracle and News Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on News 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 News. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of News has no effect on the direction of Oracle i.e., Oracle and News go up and down completely randomly.

Pair Corralation between Oracle and News

Given the investment horizon of 90 days Oracle is expected to under-perform the News. In addition to that, Oracle is 2.06 times more volatile than News Corporation. It trades about -0.05 of its total potential returns per unit of risk. News Corporation is currently generating about -0.02 per unit of volatility. If you would invest  2,891  in News Corporation on December 28, 2024 and sell it today you would lose (91.00) from holding News Corporation or give up 3.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.77%
Values	Daily Returns

Oracle  vs.  News Corp.

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.

News

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Oracle and News

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

The idea behind Oracle and News Corporation 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.