Correlation Between Oracle and Netgem SA

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

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

Diversification Opportunities for Oracle and Netgem SA

0.88

Correlation Coefficient

Oracle  Netgem SA

Very poor diversification

The 3 months correlation between Oracle and Netgem is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Oracle and Netgem SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netgem SA 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 Netgem SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Netgem SA has no effect on the direction of Oracle i.e., Oracle and Netgem SA go up and down completely randomly.

Pair Corralation between Oracle and Netgem SA

Given the investment horizon of 90 days Oracle is expected to generate 1.18 times less return on investment than Netgem SA. But when comparing it to its historical volatility, Oracle is 1.54 times less risky than Netgem SA. It trades about 0.19 of its potential returns per unit of risk. Netgem SA is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  77.00  in Netgem SA on September 4, 2024 and sell it today you would earn a total of  26.00  from holding Netgem SA or generate 33.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.46%
Values	Daily Returns

Oracle  vs.  Netgem SA

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.

Netgem SA

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Oracle and Netgem SA

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

The idea behind Oracle and Netgem SA 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.