Correlation Between Oracle and Scepter Holdings

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

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

Diversification Opportunities for Oracle and Scepter Holdings

-0.02

Correlation Coefficient

Oracle  Scepter Holdings

Good diversification

The 3 months correlation between Oracle and Scepter is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Oracle and Scepter Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scepter Holdings 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 Scepter Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scepter Holdings has no effect on the direction of Oracle i.e., Oracle and Scepter Holdings go up and down completely randomly.

Pair Corralation between Oracle and Scepter Holdings

Given the investment horizon of 90 days Oracle is expected to generate 7.35 times less return on investment than Scepter Holdings. But when comparing it to its historical volatility, Oracle is 9.26 times less risky than Scepter Holdings. It trades about 0.09 of its potential returns per unit of risk. Scepter Holdings is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  0.26  in Scepter Holdings on September 12, 2024 and sell it today you would lose (0.13) from holding Scepter Holdings or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Oracle  vs.  Scepter Holdings

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.

Scepter Holdings

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Scepter Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, Scepter Holdings disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Oracle and Scepter Holdings

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

The idea behind Oracle and Scepter Holdings 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.