Correlation Between Oracle and Era Media

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

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

Diversification Opportunities for Oracle and Era Media

-0.6

Correlation Coefficient

Oracle  Era Media

Excellent diversification

The 3 months correlation between Oracle and Era is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Oracle and Era Media Sejahtera in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Era Media Sejahtera 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 Era Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Era Media Sejahtera has no effect on the direction of Oracle i.e., Oracle and Era Media go up and down completely randomly.

Pair Corralation between Oracle and Era Media

Given the investment horizon of 90 days Oracle is expected to generate 0.37 times more return on investment than Era Media. However, Oracle is 2.71 times less risky than Era Media. It trades about 0.1 of its potential returns per unit of risk. Era Media Sejahtera is currently generating about -0.01 per unit of risk. If you would invest  7,791  in Oracle on September 5, 2024 and sell it today you would earn a total of  10,498  from holding Oracle or generate 134.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	76.97%
Values	Daily Returns

Oracle  vs.  Era Media Sejahtera

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.

Era Media Sejahtera

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Era Media Sejahtera has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Era Media is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Oracle and Era Media

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

The idea behind Oracle and Era Media Sejahtera 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.