Correlation Between Oracle and Steward Covered

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

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

Diversification Opportunities for Oracle and Steward Covered

0.92

Correlation Coefficient

Oracle  Steward Covered

Almost no diversification

The 3 months correlation between Oracle and Steward is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Oracle and Steward Ered Call in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steward Ered Call 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 Steward Covered. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steward Ered Call has no effect on the direction of Oracle i.e., Oracle and Steward Covered go up and down completely randomly.

Pair Corralation between Oracle and Steward Covered

Given the investment horizon of 90 days Oracle is expected to generate 3.05 times more return on investment than Steward Covered. However, Oracle is 3.05 times more volatile than Steward Ered Call. It trades about 0.1 of its potential returns per unit of risk. Steward Ered Call is currently generating about 0.07 per unit of risk. If you would invest  7,833  in Oracle on September 7, 2024 and sell it today you would earn a total of  10,791  from holding Oracle or generate 137.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Oracle  vs.  Steward Ered Call

Oracle

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Oracle are ranked lower than 17 (%) 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.

Steward Ered Call

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Steward Ered Call are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Steward Covered 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 Steward Covered

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

The idea behind Oracle and Steward Ered Call 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.