Correlation Between Oracle and Dreyfus Active

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

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

Diversification Opportunities for Oracle and Dreyfus Active

0.7

Correlation Coefficient

Oracle  Dreyfus Active

Poor diversification

The 3 months correlation between Oracle and Dreyfus is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Oracle and Dreyfus Active Midcap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Active Midcap 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 Dreyfus Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Active Midcap has no effect on the direction of Oracle i.e., Oracle and Dreyfus Active go up and down completely randomly.

Pair Corralation between Oracle and Dreyfus Active

Given the investment horizon of 90 days Oracle is expected to generate 2.26 times more return on investment than Dreyfus Active. However, Oracle is 2.26 times more volatile than Dreyfus Active Midcap. It trades about 0.06 of its potential returns per unit of risk. Dreyfus Active Midcap is currently generating about 0.07 per unit of risk. If you would invest  9,409  in Oracle on January 17, 2024 and sell it today you would earn a total of  2,579  from holding Oracle or generate 27.41% return on investment over 90 days.

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

Oracle  vs.  Dreyfus Active Midcap

Oracle

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Oracle are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain fundamental indicators, Oracle disclosed solid returns over the last few months and may actually be approaching a breakup point.

Dreyfus Active Midcap

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dreyfus Active Midcap are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Dreyfus Active may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Oracle and Dreyfus Active

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

The idea behind Oracle and Dreyfus Active Midcap 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.