Correlation Between Oracle and Heating Oil

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

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

Diversification Opportunities for Oracle and Heating Oil

0.12

Correlation Coefficient

Oracle  Heating Oil

Average diversification

The 3 months correlation between Oracle and Heating is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Oracle and Heating Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heating Oil 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 Heating Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heating Oil has no effect on the direction of Oracle i.e., Oracle and Heating Oil go up and down completely randomly.

Pair Corralation between Oracle and Heating Oil

Given the investment horizon of 90 days Oracle is expected to generate 1.21 times more return on investment than Heating Oil. However, Oracle is 1.21 times more volatile than Heating Oil. It trades about 0.19 of its potential returns per unit of risk. Heating Oil is currently generating about -0.24 per unit of risk. If you would invest  11,721  in Oracle on February 26, 2024 and sell it today you would earn a total of  570.00  from holding Oracle or generate 4.86% return on investment over 90 days.

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

Oracle  vs.  Heating Oil

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 unsteady fundamental indicators, Oracle may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Heating Oil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Heating Oil has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Commodity's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for Heating Oil shareholders.

Pair Trading with Oracle and Heating Oil

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

The idea behind Oracle and Heating Oil 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.