Correlation Between Oracle and Powertech Industrial

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

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

Diversification Opportunities for Oracle and Powertech Industrial

0.42

Correlation Coefficient

Oracle  Powertech Industrial

Very weak diversification

The 3 months correlation between Oracle and Powertech is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Oracle and Powertech Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Powertech Industrial 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 Powertech Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Powertech Industrial has no effect on the direction of Oracle i.e., Oracle and Powertech Industrial go up and down completely randomly.

Pair Corralation between Oracle and Powertech Industrial

Given the investment horizon of 90 days Oracle is expected to generate 0.84 times more return on investment than Powertech Industrial. However, Oracle is 1.19 times less risky than Powertech Industrial. It trades about 0.2 of its potential returns per unit of risk. Powertech Industrial Co is currently generating about 0.14 per unit of risk. If you would invest  14,043  in Oracle on September 4, 2024 and sell it today you would earn a total of  4,098  from holding Oracle or generate 29.18% return on investment over 90 days.

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

Oracle  vs.  Powertech Industrial Co

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.

Powertech Industrial

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Powertech Industrial Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Powertech Industrial showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Oracle and Powertech Industrial

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

The idea behind Oracle and Powertech Industrial Co 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 CEOs Directory module to screen CEOs from public companies around the world.