Correlation Between Oracle and Eternal Energy

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

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

Diversification Opportunities for Oracle and Eternal Energy

0.69

Correlation Coefficient

Oracle  Eternal Energy

Poor diversification

The 3 months correlation between Oracle and Eternal is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Oracle and Eternal Energy Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eternal Energy Public 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 Eternal Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eternal Energy Public has no effect on the direction of Oracle i.e., Oracle and Eternal Energy go up and down completely randomly.

Pair Corralation between Oracle and Eternal Energy

Given the investment horizon of 90 days Oracle is expected to generate 1.75 times less return on investment than Eternal Energy. But when comparing it to its historical volatility, Oracle is 2.64 times less risky than Eternal Energy. It trades about 0.19 of its potential returns per unit of risk. Eternal Energy Public is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  14.00  in Eternal Energy Public on September 5, 2024 and sell it today you would earn a total of  6.00  from holding Eternal Energy Public or generate 42.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Oracle  vs.  Eternal Energy Public

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.

Eternal Energy Public

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eternal Energy Public are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental drivers, Eternal Energy disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Oracle and Eternal Energy

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

The idea behind Oracle and Eternal Energy Public 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.