Correlation Between Open Text and Oracle
Can any of the company-specific risk be diversified away by investing in both Open Text and Oracle 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 Open Text and Oracle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Open Text Corp and Oracle, you can compare the effects of market volatilities on Open Text and Oracle 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 Open Text with a short position of Oracle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Open Text and Oracle.
Diversification Opportunities for Open Text and Oracle
Very good diversification
The 3 months correlation between Open and Oracle is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Open Text Corp and Oracle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oracle and Open Text 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 Open Text Corp are associated (or correlated) with Oracle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oracle has no effect on the direction of Open Text i.e., Open Text and Oracle go up and down completely randomly.
Pair Corralation between Open Text and Oracle
Given the investment horizon of 90 days Open Text is expected to generate 3.63 times less return on investment than Oracle. But when comparing it to its historical volatility, Open Text Corp is 1.07 times less risky than Oracle. It trades about 0.02 of its potential returns per unit of risk. Oracle is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 8,734 in Oracle on January 17, 2024 and sell it today you would earn a total of 3,328 from holding Oracle or generate 38.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Open Text Corp vs. Oracle
Performance |
| Timeline |
| Open Text Corp |
| Oracle |
Open Text and Oracle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Open Text and Oracle
The main advantage of trading using opposite Open Text and Oracle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Open Text position performs unexpectedly, Oracle 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 Oracle will offset losses from the drop in Oracle's long position.The idea behind Open Text Corp and Oracle 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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