Correlation Between Oracle and Wilmar International

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

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

Diversification Opportunities for Oracle and Wilmar International

0.13

Correlation Coefficient

Oracle  Wilmar International

Average diversification

The 3 months correlation between Oracle and Wilmar is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Oracle and Wilmar International Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wilmar International 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 Wilmar International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wilmar International has no effect on the direction of Oracle i.e., Oracle and Wilmar International go up and down completely randomly.

Pair Corralation between Oracle and Wilmar International

Given the investment horizon of 90 days Oracle is expected to generate 1.04 times more return on investment than Wilmar International. However, Oracle is 1.04 times more volatile than Wilmar International Limited. It trades about 0.21 of its potential returns per unit of risk. Wilmar International Limited is currently generating about 0.04 per unit of risk. If you would invest  14,149  in Oracle on September 6, 2024 and sell it today you would earn a total of  4,670  from holding Oracle or generate 33.01% return on investment over 90 days.

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

Oracle  vs.  Wilmar International Limited

Oracle

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Oracle are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal fundamental indicators, Oracle disclosed solid returns over the last few months and may actually be approaching a breakup point.

Wilmar International

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wilmar International Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical indicators, Wilmar International is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Oracle and Wilmar International

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

The idea behind Oracle and Wilmar International Limited 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.