Correlation Between Oracle and Cannabis Sativa

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

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

Diversification Opportunities for Oracle and Cannabis Sativa

0.09

Correlation Coefficient

Oracle  Cannabis Sativa

Significant diversification

The 3 months correlation between Oracle and Cannabis is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Oracle and Cannabis Sativa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cannabis Sativa 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 Cannabis Sativa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cannabis Sativa has no effect on the direction of Oracle i.e., Oracle and Cannabis Sativa go up and down completely randomly.

Pair Corralation between Oracle and Cannabis Sativa

Given the investment horizon of 90 days Oracle is expected to generate 23.98 times less return on investment than Cannabis Sativa. But when comparing it to its historical volatility, Oracle is 15.86 times less risky than Cannabis Sativa. It trades about 0.18 of its potential returns per unit of risk. Cannabis Sativa is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  0.50  in Cannabis Sativa on September 11, 2024 and sell it today you would earn a total of  8.60  from holding Cannabis Sativa or generate 1720.0% return on investment over 90 days.

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

Oracle  vs.  Cannabis Sativa

Oracle

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Oracle are ranked lower than 14 (%) 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.

Cannabis Sativa

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cannabis Sativa are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting fundamental indicators, Cannabis Sativa unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Oracle and Cannabis Sativa

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

The idea behind Oracle and Cannabis Sativa 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.