Correlation Between Oracle and SGS SA

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

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

Diversification Opportunities for Oracle and SGS SA

-0.68

Correlation Coefficient

Oracle  SGS SA

Excellent diversification

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

Pair Corralation between Oracle and SGS SA

Given the investment horizon of 90 days Oracle is expected to generate 0.68 times more return on investment than SGS SA. However, Oracle is 1.46 times less risky than SGS SA. It trades about 0.05 of its potential returns per unit of risk. SGS SA is currently generating about -0.06 per unit of risk. If you would invest  16,416  in Oracle on September 18, 2024 and sell it today you would earn a total of  707.00  from holding Oracle or generate 4.31% return on investment over 90 days.

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

Oracle  vs.  SGS SA

Oracle

Risk-Adjusted Performance

3 of 100

Weak

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.

SGS SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SGS SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Oracle and SGS SA

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

The idea behind Oracle and SGS SA 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.