Correlation Between Oracle and Materials Portfolio

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Can any of the company-specific risk be diversified away by investing in both Oracle and Materials Portfolio 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 Materials Portfolio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Oracle and Materials Portfolio Fidelity, you can compare the effects of market volatilities on Oracle and Materials Portfolio 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 Materials Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oracle and Materials Portfolio.

Diversification Opportunities for Oracle and Materials Portfolio

0.68
  Correlation Coefficient

Poor diversification

The 3 months correlation between Oracle and Materials is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Oracle and Materials Portfolio Fidelity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Materials Portfolio 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 Materials Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Materials Portfolio has no effect on the direction of Oracle i.e., Oracle and Materials Portfolio go up and down completely randomly.

Pair Corralation between Oracle and Materials Portfolio

Given the investment horizon of 90 days Oracle is expected to generate 2.56 times more return on investment than Materials Portfolio. However, Oracle is 2.56 times more volatile than Materials Portfolio Fidelity. It trades about 0.21 of its potential returns per unit of risk. Materials Portfolio Fidelity is currently generating about 0.15 per unit of risk. If you would invest  14,149  in Oracle on September 6, 2024 and sell it today you would earn a total of  4,670  from holding Oracle or generate 33.01% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Oracle  vs.  Materials Portfolio Fidelity

 Performance 
       Timeline  
Oracle 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Oracle are ranked lower than 16 (%) 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.
Materials Portfolio 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Materials Portfolio Fidelity are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Materials Portfolio may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Oracle and Materials Portfolio Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Oracle and Materials Portfolio

The main advantage of trading using opposite Oracle and Materials Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oracle position performs unexpectedly, Materials Portfolio 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 Materials Portfolio will offset losses from the drop in Materials Portfolio's long position.
The idea behind Oracle and Materials Portfolio Fidelity 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 Global Correlations module to find global opportunities by holding instruments from different markets.

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