Correlation Between Oracle and California Tax

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

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

Diversification Opportunities for Oracle and California Tax

-0.04

Correlation Coefficient

Oracle  California Tax

Good diversification

The 3 months correlation between Oracle and California is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Oracle and California Tax Free Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California Tax Free 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 California Tax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California Tax Free has no effect on the direction of Oracle i.e., Oracle and California Tax go up and down completely randomly.

Pair Corralation between Oracle and California Tax

Given the investment horizon of 90 days Oracle is expected to generate 6.33 times more return on investment than California Tax. However, Oracle is 6.33 times more volatile than California Tax Free Bond. It trades about 0.16 of its potential returns per unit of risk. California Tax Free Bond is currently generating about 0.05 per unit of risk. If you would invest  16,102  in Oracle on September 12, 2024 and sell it today you would earn a total of  2,943  from holding Oracle or generate 18.28% return on investment over 90 days.

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

Oracle  vs.  California Tax Free Bond

Oracle

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Oracle are ranked lower than 12 (%) 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.

California Tax Free

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in California Tax Free Bond are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, California Tax 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 California Tax

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

The idea behind Oracle and California Tax Free Bond 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.