Correlation Between Adobe Systems and Oracle

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

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

Diversification Opportunities for Adobe Systems and Oracle

-0.39

Correlation Coefficient

Adobe Systems  Oracle

Very good diversification

The 3 months correlation between Adobe and Oracle is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Adobe Systems Incorporated and Oracle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oracle and Adobe Systems 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 Adobe Systems Incorporated 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 Adobe Systems i.e., Adobe Systems and Oracle go up and down completely randomly.

Pair Corralation between Adobe Systems and Oracle

Given the investment horizon of 90 days Adobe Systems Incorporated is expected to under-perform the Oracle. In addition to that, Adobe Systems is 1.18 times more volatile than Oracle. It trades about -0.16 of its total potential returns per unit of risk. Oracle is currently generating about 0.02 per unit of volatility. If you would invest  11,369  in Oracle on February 2, 2024 and sell it today you would earn a total of  94.00  from holding Oracle or generate 0.83% return on investment over 90 days.

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

Adobe Systems Incorporated  vs.  Oracle

Adobe Systems rporated

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adobe Systems Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's fundamental drivers remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Oracle

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oracle has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Adobe Systems and Oracle

The main advantage of trading using opposite Adobe Systems and Oracle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adobe Systems 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 Adobe Systems Incorporated 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.