Correlation Between Palantir Technologies and Oracle

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

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

Diversification Opportunities for Palantir Technologies and Oracle

0.8

Correlation Coefficient

Palantir Technologies  Oracle

Very poor diversification

The 3 months correlation between Palantir and Oracle is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Palantir Technologies and Oracle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oracle and Palantir Technologies 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 Palantir Technologies are associated (or correlated) with Oracle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oracle has no effect on the direction of Palantir Technologies i.e., Palantir Technologies and Oracle go up and down completely randomly.

Pair Corralation between Palantir Technologies and Oracle

Assuming the 90 days trading horizon Palantir Technologies is expected to generate 1.62 times more return on investment than Oracle. However, Palantir Technologies is 1.62 times more volatile than Oracle. It trades about 0.28 of its potential returns per unit of risk. Oracle is currently generating about 0.1 per unit of risk. If you would invest  4,910  in Palantir Technologies on September 30, 2024 and sell it today you would earn a total of  11,793  from holding Palantir Technologies or generate 240.18% return on investment over 90 days.

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

Palantir Technologies  vs.  Oracle

Palantir Technologies

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Palantir Technologies are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain essential indicators, Palantir Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.

Oracle

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Oracle are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Oracle sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Palantir Technologies and Oracle

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

The idea behind Palantir Technologies and Oracle 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.