Correlation Between Oracle and Short-term Fund

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

By analyzing existing cross correlation between Oracle and Short Term Fund Institutional, you can compare the effects of market volatilities on Oracle and Short-term Fund 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 Short-term Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oracle and Short-term Fund.

Diversification Opportunities for Oracle and Short-term Fund

0.83

Correlation Coefficient

Oracle  Short-term Fund

Very poor diversification

The 3 months correlation between Oracle and Short-term is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Oracle and Short Term Fund Institutional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Term Fund 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 Short-term Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Term Fund has no effect on the direction of Oracle i.e., Oracle and Short-term Fund go up and down completely randomly.

Pair Corralation between Oracle and Short-term Fund

Given the investment horizon of 90 days Oracle is expected to generate 44.94 times more return on investment than Short-term Fund. However, Oracle is 44.94 times more volatile than Short Term Fund Institutional. It trades about 0.19 of its potential returns per unit of risk. Short Term Fund Institutional is currently generating about 0.21 per unit of risk. If you would invest  16,959  in Oracle on September 5, 2024 and sell it today you would earn a total of  1,330  from holding Oracle or generate 7.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Oracle  vs.  Short Term Fund Institutional

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.

Short Term Fund

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Short Term Fund Institutional are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical indicators, Short-term Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Oracle and Short-term Fund

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

The idea behind Oracle and Short Term Fund Institutional 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.