Correlation Between Oracle and First National

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

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

Diversification Opportunities for Oracle and First National

0.56

Correlation Coefficient

Oracle  First National

Very weak diversification

The 3 months correlation between Oracle and First is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Oracle and First National of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First National 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 First National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First National has no effect on the direction of Oracle i.e., Oracle and First National go up and down completely randomly.

Pair Corralation between Oracle and First National

Given the investment horizon of 90 days Oracle is expected to generate 1.57 times more return on investment than First National. However, Oracle is 1.57 times more volatile than First National of. It trades about 0.1 of its potential returns per unit of risk. First National of is currently generating about 0.02 per unit of risk. If you would invest  16,102  in Oracle on September 12, 2024 and sell it today you would earn a total of  1,756  from holding Oracle or generate 10.91% return on investment over 90 days.

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

Oracle  vs.  First National of

Oracle

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Oracle are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal fundamental indicators, Oracle may actually be approaching a critical reversion point that can send shares even higher in January 2025.

First National

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First National of are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, First National is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Oracle and First National

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

The idea behind Oracle and First National of 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.