Correlation Between Oracle and Payfare

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

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

Diversification Opportunities for Oracle and Payfare

-0.54

Correlation Coefficient

Oracle  Payfare

Excellent diversification

The 3 months correlation between Oracle and Payfare is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Oracle and Payfare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payfare 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 Payfare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Payfare has no effect on the direction of Oracle i.e., Oracle and Payfare go up and down completely randomly.

Pair Corralation between Oracle and Payfare

Given the investment horizon of 90 days Oracle is expected to under-perform the Payfare. But the stock apears to be less risky and, when comparing its historical volatility, Oracle is 1.27 times less risky than Payfare. The stock trades about -0.17 of its potential returns per unit of risk. The Payfare is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  151.00  in Payfare on September 18, 2024 and sell it today you would earn a total of  6.00  from holding Payfare or generate 3.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Oracle  vs.  Payfare

Oracle

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Oracle are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, Oracle is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Payfare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Payfare has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Oracle and Payfare

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

The idea behind Oracle and Payfare 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.