Correlation Between Oracle and Northern Emerging

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

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

Diversification Opportunities for Oracle and Northern Emerging

-0.17

Correlation Coefficient

Oracle  Northern Emerging

Good diversification

The 3 months correlation between Oracle and Northern is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Oracle and Northern Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Emerging Markets 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 Northern Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Emerging Markets has no effect on the direction of Oracle i.e., Oracle and Northern Emerging go up and down completely randomly.

Pair Corralation between Oracle and Northern Emerging

Given the investment horizon of 90 days Oracle is expected to under-perform the Northern Emerging. In addition to that, Oracle is 3.45 times more volatile than Northern Emerging Markets. It trades about -0.07 of its total potential returns per unit of risk. Northern Emerging Markets is currently generating about 0.08 per unit of volatility. If you would invest  1,115  in Northern Emerging Markets on December 29, 2024 and sell it today you would earn a total of  49.00  from holding Northern Emerging Markets or generate 4.39% return on investment over 90 days.

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

Oracle  vs.  Northern Emerging Markets

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 abnormal performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Northern Emerging Markets

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Emerging Markets are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Northern Emerging 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 Northern Emerging

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

The idea behind Oracle and Northern Emerging Markets 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.