Correlation Between VeriSign and Oracle

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

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

Diversification Opportunities for VeriSign and Oracle

-0.38

Correlation Coefficient

VeriSign  Oracle

Very good diversification

The 3 months correlation between VeriSign and Oracle is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding VeriSign and Oracle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oracle and VeriSign 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 VeriSign 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 VeriSign i.e., VeriSign and Oracle go up and down completely randomly.

Pair Corralation between VeriSign and Oracle

Given the investment horizon of 90 days VeriSign is expected to under-perform the Oracle. In addition to that, VeriSign is 1.1 times more volatile than Oracle. It trades about -0.29 of its total potential returns per unit of risk. Oracle is currently generating about -0.3 per unit of volatility. If you would invest  12,508  in Oracle on January 31, 2024 and sell it today you would lose (859.00) from holding Oracle or give up 6.87% of portfolio value over 90 days.

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

VeriSign  vs.  Oracle

VeriSign

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VeriSign has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Oracle

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Oracle are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, Oracle is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with VeriSign and Oracle

The main advantage of trading using opposite VeriSign and Oracle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VeriSign 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 VeriSign 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.

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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.