Correlation Between Larsen Toubro and Oracle Financial

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

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

Diversification Opportunities for Larsen Toubro and Oracle Financial

0.67

Correlation Coefficient

Larsen Toubro  Oracle Financial

Poor diversification

The 3 months correlation between Larsen and Oracle is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Larsen Toubro Limited and Oracle Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oracle Financial Services and Larsen Toubro 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 Larsen Toubro Limited are associated (or correlated) with Oracle Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oracle Financial Services has no effect on the direction of Larsen Toubro i.e., Larsen Toubro and Oracle Financial go up and down completely randomly.

Pair Corralation between Larsen Toubro and Oracle Financial

Assuming the 90 days trading horizon Larsen Toubro is expected to generate 1.56 times less return on investment than Oracle Financial. But when comparing it to its historical volatility, Larsen Toubro Limited is 1.99 times less risky than Oracle Financial. It trades about 0.11 of its potential returns per unit of risk. Oracle Financial Services is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  793,579  in Oracle Financial Services on April 22, 2025 and sell it today you would earn a total of  85,471  from holding Oracle Financial Services or generate 10.77% return on investment over 90 days.

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

Larsen Toubro Limited  vs.  Oracle Financial Services

Larsen Toubro Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Larsen Toubro Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Larsen Toubro may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Oracle Financial Services

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Oracle Financial Services are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Oracle Financial may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Larsen Toubro and Oracle Financial

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

The idea behind Larsen Toubro Limited and Oracle Financial Services 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..