Correlation Between Oracle and Shenzhen New

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

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

Diversification Opportunities for Oracle and Shenzhen New

0.78

Correlation Coefficient

Oracle  Shenzhen New

Poor diversification

The 3 months correlation between Oracle and Shenzhen is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Oracle and Shenzhen New Nanshan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen New Nanshan 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 Shenzhen New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen New Nanshan has no effect on the direction of Oracle i.e., Oracle and Shenzhen New go up and down completely randomly.

Pair Corralation between Oracle and Shenzhen New

Given the investment horizon of 90 days Oracle is expected to generate 1.5 times less return on investment than Shenzhen New. But when comparing it to its historical volatility, Oracle is 1.45 times less risky than Shenzhen New. It trades about 0.2 of its potential returns per unit of risk. Shenzhen New Nanshan is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  194.00  in Shenzhen New Nanshan on September 4, 2024 and sell it today you would earn a total of  80.00  from holding Shenzhen New Nanshan or generate 41.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	92.06%
Values	Daily Returns

Oracle  vs.  Shenzhen New Nanshan

Oracle

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Oracle are ranked lower than 15 (%) 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.

Shenzhen New Nanshan

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen New Nanshan are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen New sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Oracle and Shenzhen New

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

The idea behind Oracle and Shenzhen New Nanshan 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.