Correlation Between Oracle and Allot Communications

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

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

Diversification Opportunities for Oracle and Allot Communications

0.76

Correlation Coefficient

Oracle  Allot Communications

Poor diversification

The 3 months correlation between Oracle and Allot is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Oracle and Allot Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allot Communications 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 Allot Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allot Communications has no effect on the direction of Oracle i.e., Oracle and Allot Communications go up and down completely randomly.

Pair Corralation between Oracle and Allot Communications

Given the investment horizon of 90 days Oracle is expected to generate 0.5 times more return on investment than Allot Communications. However, Oracle is 1.99 times less risky than Allot Communications. It trades about 0.38 of its potential returns per unit of risk. Allot Communications is currently generating about 0.1 per unit of risk. If you would invest  13,112  in Oracle on April 23, 2025 and sell it today you would earn a total of  10,699  from holding Oracle or generate 81.6% return on investment over 90 days.

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

Oracle  vs.  Allot Communications

Oracle

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Oracle are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady fundamental indicators, Oracle disclosed solid returns over the last few months and may actually be approaching a breakup point.

Allot Communications

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Allot Communications are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak essential indicators, Allot Communications unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Oracle and Allot Communications

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

The idea behind Oracle and Allot Communications 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.