Correlation Between Oracle and Ultra Fund

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

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

Diversification Opportunities for Oracle and Ultra Fund

0.92

Correlation Coefficient

Oracle  Ultra Fund

Almost no diversification

The 3 months correlation between Oracle and Ultra is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Oracle and Ultra Fund Y in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultra Fund Y 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 Ultra Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultra Fund Y has no effect on the direction of Oracle i.e., Oracle and Ultra Fund go up and down completely randomly.

Pair Corralation between Oracle and Ultra Fund

Given the investment horizon of 90 days Oracle is expected to generate 1.7 times more return on investment than Ultra Fund. However, Oracle is 1.7 times more volatile than Ultra Fund Y. It trades about 0.1 of its potential returns per unit of risk. Ultra Fund Y is currently generating about 0.08 per unit of risk. If you would invest  7,961  in Oracle on September 4, 2024 and sell it today you would earn a total of  10,180  from holding Oracle or generate 127.87% return on investment over 90 days.

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

Oracle  vs.  Ultra Fund Y

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.

Ultra Fund Y

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ultra Fund Y are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Ultra Fund showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Oracle and Ultra Fund

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

The idea behind Oracle and Ultra Fund Y 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.

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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.