Correlation Between Indian Oil and Banka BioLoo
Can any of the company-specific risk be diversified away by investing in both Indian Oil and Banka BioLoo 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 Indian Oil and Banka BioLoo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Indian Oil and Banka BioLoo Limited, you can compare the effects of market volatilities on Indian Oil and Banka BioLoo 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 Indian Oil with a short position of Banka BioLoo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indian Oil and Banka BioLoo.
Diversification Opportunities for Indian Oil and Banka BioLoo
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Indian and Banka is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Indian Oil and Banka BioLoo Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banka BioLoo Limited and Indian Oil 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 Indian Oil are associated (or correlated) with Banka BioLoo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banka BioLoo Limited has no effect on the direction of Indian Oil i.e., Indian Oil and Banka BioLoo go up and down completely randomly.
Pair Corralation between Indian Oil and Banka BioLoo
Assuming the 90 days trading horizon Indian Oil is expected to under-perform the Banka BioLoo. But the stock apears to be less risky and, when comparing its historical volatility, Indian Oil is 1.76 times less risky than Banka BioLoo. The stock trades about -0.2 of its potential returns per unit of risk. The Banka BioLoo Limited is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 12,703 in Banka BioLoo Limited on August 28, 2024 and sell it today you would lose (1,817) from holding Banka BioLoo Limited or give up 14.3% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.41% |
| Values | Daily Returns |
Indian Oil vs. Banka BioLoo Limited
Performance |
| Timeline |
| Indian Oil |
| Banka BioLoo Limited |
Indian Oil and Banka BioLoo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Indian Oil and Banka BioLoo
The main advantage of trading using opposite Indian Oil and Banka BioLoo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indian Oil position performs unexpectedly, Banka BioLoo 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 Banka BioLoo will offset losses from the drop in Banka BioLoo's long position.| Indian Oil vs. California Software | Indian Oil vs. Music Broadcast Limited | Indian Oil vs. Hindware Home Innovation | Indian Oil vs. Credo Brands Marketing |
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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 the Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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