Correlation Between Indian Oil and General Insurance
Can any of the company-specific risk be diversified away by investing in both Indian Oil and General Insurance 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 General Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Indian Oil and General Insurance, you can compare the effects of market volatilities on Indian Oil and General Insurance 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 General Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indian Oil and General Insurance.
Diversification Opportunities for Indian Oil and General Insurance
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Indian and General is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Indian Oil and General Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Insurance 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 General Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Insurance has no effect on the direction of Indian Oil i.e., Indian Oil and General Insurance go up and down completely randomly.
Pair Corralation between Indian Oil and General Insurance
Assuming the 90 days trading horizon Indian Oil is expected to generate 4.41 times less return on investment than General Insurance. But when comparing it to its historical volatility, Indian Oil is 1.61 times less risky than General Insurance. It trades about 0.14 of its potential returns per unit of risk. General Insurance is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest 36,630 in General Insurance on September 13, 2024 and sell it today you would earn a total of 5,905 from holding General Insurance or generate 16.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Indian Oil vs. General Insurance
Performance |
| Timeline |
| Indian Oil |
| General Insurance |
Indian Oil and General Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Indian Oil and General Insurance
The main advantage of trading using opposite Indian Oil and General Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indian Oil position performs unexpectedly, General Insurance 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 General Insurance will offset losses from the drop in General Insurance's long position.| Indian Oil vs. Kalyani Investment | Indian Oil vs. Praxis Home Retail | Indian Oil vs. The Investment Trust | Indian Oil vs. Nalwa Sons Investments |
| General Insurance vs. Kingfa Science Technology | General Insurance vs. Rico Auto Industries | General Insurance vs. GACM Technologies Limited | General Insurance vs. COSMO FIRST LIMITED |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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