Correlation Between Oracle and Soybean Meal

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

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

Diversification Opportunities for Oracle and Soybean Meal

0.22

Correlation Coefficient

Oracle  Soybean Meal

Modest diversification

The 3 months correlation between Oracle and Soybean is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Oracle and Soybean Meal Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Soybean Meal Futures 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 Soybean Meal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Soybean Meal Futures has no effect on the direction of Oracle i.e., Oracle and Soybean Meal go up and down completely randomly.

Pair Corralation between Oracle and Soybean Meal

Given the investment horizon of 90 days Oracle is expected to under-perform the Soybean Meal. In addition to that, Oracle is 2.09 times more volatile than Soybean Meal Futures. It trades about -0.05 of its total potential returns per unit of risk. Soybean Meal Futures is currently generating about -0.05 per unit of volatility. If you would invest  31,180  in Soybean Meal Futures on December 29, 2024 and sell it today you would lose (1,830) from holding Soybean Meal Futures or give up 5.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.31%
Values	Daily Returns

Oracle  vs.  Soybean Meal Futures

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 latest abnormal performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Soybean Meal Futures

Risk-Adjusted Performance

Very Weak

Over the last 90 days Soybean Meal Futures has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Soybean Meal is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Oracle and Soybean Meal

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

The idea behind Oracle and Soybean Meal Futures 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.