Correlation Between Oracle and X Square

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

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

Diversification Opportunities for Oracle and X Square

0.86

Correlation Coefficient

Oracle  X Square

Very poor diversification

The 3 months correlation between Oracle and SQCBX is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Oracle and X Square Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on X Square Balanced 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 X Square. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of X Square Balanced has no effect on the direction of Oracle i.e., Oracle and X Square go up and down completely randomly.

Pair Corralation between Oracle and X Square

Given the investment horizon of 90 days Oracle is expected to generate 4.35 times more return on investment than X Square. However, Oracle is 4.35 times more volatile than X Square Balanced. It trades about 0.22 of its potential returns per unit of risk. X Square Balanced is currently generating about 0.22 per unit of risk. If you would invest  13,919  in Oracle on September 3, 2024 and sell it today you would earn a total of  4,565  from holding Oracle or generate 32.8% return on investment over 90 days.

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

Oracle  vs.  X Square Balanced

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.

X Square Balanced

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in X Square Balanced are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental drivers, X Square may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Oracle and X Square

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

The idea behind Oracle and X Square Balanced 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..