Correlation Between Oracle and PRO

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

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

Diversification Opportunities for Oracle and PRO

0.45

Correlation Coefficient

Oracle  PRO

Very weak diversification

The 3 months correlation between Oracle and PRO is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Oracle and PRO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PRO 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 PRO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PRO has no effect on the direction of Oracle i.e., Oracle and PRO go up and down completely randomly.

Pair Corralation between Oracle and PRO

Given the investment horizon of 90 days Oracle is expected to generate 1.93 times less return on investment than PRO. But when comparing it to its historical volatility, Oracle is 4.83 times less risky than PRO. It trades about 0.19 of its potential returns per unit of risk. PRO is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  109.00  in PRO on September 4, 2024 and sell it today you would earn a total of  32.00  from holding PRO or generate 29.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Oracle  vs.  PRO

Oracle

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Oracle are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal fundamental indicators, Oracle disclosed solid returns over the last few months and may actually be approaching a breakup point.

PRO

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PRO are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, PRO exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Oracle and PRO

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

The idea behind Oracle and PRO 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 CEOs Directory module to screen CEOs from public companies around the world.