Correlation Between Sterling Construction and Oracle

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

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

Diversification Opportunities for Sterling Construction and Oracle

0.91

Correlation Coefficient

Sterling Construction  Oracle

Almost no diversification

The 3 months correlation between Sterling and Oracle is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Construction and Oracle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oracle and Sterling Construction 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 Sterling Construction 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 Sterling Construction i.e., Sterling Construction and Oracle go up and down completely randomly.

Pair Corralation between Sterling Construction and Oracle

Assuming the 90 days horizon Sterling Construction is expected to under-perform the Oracle. In addition to that, Sterling Construction is 1.06 times more volatile than Oracle. It trades about -0.19 of its total potential returns per unit of risk. Oracle is currently generating about -0.1 per unit of volatility. If you would invest  17,330  in Oracle on September 28, 2024 and sell it today you would lose (916.00) from holding Oracle or give up 5.29% of portfolio value over 90 days.

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

Sterling Construction  vs.  Oracle

Sterling Construction

Risk-Adjusted Performance

11 of 100

Good

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

Oracle

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Oracle are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Oracle may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sterling Construction and Oracle

The main advantage of trading using opposite Sterling Construction and Oracle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sterling Construction 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 Sterling Construction 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.