Correlation Between Oracle and Boeing

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

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

Diversification Opportunities for Oracle and Boeing

-0.51

Correlation Coefficient

Oracle  Boeing

Excellent diversification

The 3 months correlation between Oracle and Boeing is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Oracle and The Boeing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boeing 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 Boeing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boeing has no effect on the direction of Oracle i.e., Oracle and Boeing go up and down completely randomly.

Pair Corralation between Oracle and Boeing

Assuming the 90 days trading horizon Oracle is expected to generate 0.82 times more return on investment than Boeing. However, Oracle is 1.22 times less risky than Boeing. It trades about 0.07 of its potential returns per unit of risk. The Boeing is currently generating about 0.04 per unit of risk. If you would invest  5,695  in Oracle on February 26, 2024 and sell it today you would earn a total of  4,885  from holding Oracle or generate 85.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Oracle  vs.  The Boeing

Oracle

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Oracle are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Oracle sustained solid returns over the last few months and may actually be approaching a breakup point.

Boeing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Boeing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Oracle and Boeing

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

The idea behind Oracle and The Boeing 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.