Correlation Between Oracle Corp and Snap On

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Can any of the company-specific risk be diversified away by investing in both Oracle Corp and Snap On 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 Corp and Snap On into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Oracle Corp and Snap-On, you can compare the effects of market volatilities on Oracle Corp and Snap On 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 Corp with a short position of Snap On. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oracle Corp and Snap On.

Diversification Opportunities for Oracle Corp and Snap On

0.65
  Correlation Coefficient

Poor diversification

The 3 months correlation between Oracle and Snap On is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Oracle Corp and Snap-On in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Snap-On and Oracle Corp 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 Corp are associated (or correlated) with Snap On. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Snap-On has no effect on the direction of Oracle Corp i.e., Oracle Corp and Snap On go up and down completely randomly.

Pair Corralation between Oracle Corp and Snap On

Assuming the 90 days horizon Oracle Corp is expected to generate 2.76 times less return on investment than Snap On. But when comparing it to its historical volatility, Oracle Corp is 2.08 times less risky than Snap On. It trades about 0.22 of its potential returns per unit of risk. Snap-On is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  22,052  in Snap-On on August 31, 2022 and sell it today you would earn a total of  1,866  from holding Snap-On or generate 8.46% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Oracle Corp  vs.  Snap-On

 Performance (%) 
       Timeline  
Oracle Corp 
Oracle Performance
0 of 100
Over the last 90 days Oracle Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Oracle Corp is not utilizing all of its potentials. The new stock price tumult, may contribute to shorter-term losses for the shareholders.

Oracle Price Channel

Snap-On 
Snap On Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Snap-On are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Snap On may actually be approaching a critical reversion point that can send shares even higher in December 2022.

Snap On Price Channel

Oracle Corp and Snap On Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Oracle Corp and Snap On

The main advantage of trading using opposite Oracle Corp and Snap On positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oracle Corp position performs unexpectedly, Snap On 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 Snap On will offset losses from the drop in Snap On's long position.
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The idea behind Oracle Corp and Snap-On 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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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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