Correlation Between Oracle and Zonetail

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

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

Diversification Opportunities for Oracle and Zonetail

-0.32

Correlation Coefficient

Oracle  Zonetail

Very good diversification

The 3 months correlation between Oracle and Zonetail is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Oracle and Zonetail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zonetail 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 Zonetail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zonetail has no effect on the direction of Oracle i.e., Oracle and Zonetail go up and down completely randomly.

Pair Corralation between Oracle and Zonetail

Given the investment horizon of 90 days Oracle is expected to under-perform the Zonetail. But the stock apears to be less risky and, when comparing its historical volatility, Oracle is 2.49 times less risky than Zonetail. The stock trades about -0.07 of its potential returns per unit of risk. The Zonetail is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  0.79  in Zonetail on December 29, 2024 and sell it today you would earn a total of  0.61  from holding Zonetail or generate 77.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.31%
Values	Daily Returns

Oracle  vs.  Zonetail

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 abnormal performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Zonetail

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zonetail are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal essential indicators, Zonetail reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Oracle and Zonetail

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

The idea behind Oracle and Zonetail 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .