Correlation Between Oracle and Russell 2000

Can any of the company-specific risk be diversified away by investing in both Oracle and Russell 2000 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 Russell 2000 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Oracle and Russell 2000 15x, you can compare the effects of market volatilities on Oracle and Russell 2000 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 Russell 2000. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oracle and Russell 2000.

Diversification Opportunities for Oracle and Russell 2000

0.88

Correlation Coefficient

Oracle  Russell 2000

Very poor diversification

The 3 months correlation between Oracle and Russell is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Oracle and Russell 2000 15x in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Russell 2000 15x 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 Russell 2000. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Russell 2000 15x has no effect on the direction of Oracle i.e., Oracle and Russell 2000 go up and down completely randomly.

Pair Corralation between Oracle and Russell 2000

Given the investment horizon of 90 days Oracle is expected to generate 1.25 times less return on investment than Russell 2000. In addition to that, Oracle is 1.05 times more volatile than Russell 2000 15x. It trades about 0.09 of its total potential returns per unit of risk. Russell 2000 15x is currently generating about 0.12 per unit of volatility. If you would invest  4,029  in Russell 2000 15x on September 13, 2024 and sell it today you would earn a total of  550.00  from holding Russell 2000 15x or generate 13.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Oracle  vs.  Russell 2000 15x

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.

Russell 2000 15x

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Russell 2000 15x are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak primary indicators, Russell 2000 showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Oracle and Russell 2000

The main advantage of trading using opposite Oracle and Russell 2000 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oracle position performs unexpectedly, Russell 2000 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 Russell 2000 will offset losses from the drop in Russell 2000's long position.

The idea behind Oracle and Russell 2000 15x 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.