Correlation Between Oracle and Adyen NV

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

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

Diversification Opportunities for Oracle and Adyen NV

0.75

Correlation Coefficient

Oracle  Adyen NV

Poor diversification

The 3 months correlation between Oracle and Adyen NV is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Oracle and Adyen NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adyen NV 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 Adyen NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adyen NV has no effect on the direction of Oracle i.e., Oracle and Adyen NV go up and down completely randomly.

Pair Corralation between Oracle and Adyen NV

Given the investment horizon of 90 days Oracle is expected to generate 1.44 times less return on investment than Adyen NV. But when comparing it to its historical volatility, Oracle is 1.64 times less risky than Adyen NV. It trades about 0.1 of its potential returns per unit of risk. Adyen NV is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  765.00  in Adyen NV on August 9, 2024 and sell it today you would earn a total of  762.00  from holding Adyen NV or generate 99.61% return on investment over 90 days.

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

Oracle  vs.  Adyen NV

Oracle

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Oracle are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental indicators, Oracle disclosed solid returns over the last few months and may actually be approaching a breakup point.

Adyen NV

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Adyen NV are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical and fundamental indicators, Adyen NV showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Oracle and Adyen NV

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

The idea behind Oracle and Adyen NV 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.