Correlation Between Indian Oil and Indian Card

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

Diversification Opportunities for Indian Oil and Indian Card

0.73
  Correlation Coefficient

Poor diversification

The 3 months correlation between Indian and Indian is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Indian Oil and Indian Card Clothing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indian Card Clothing 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 Indian Card. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indian Card Clothing has no effect on the direction of Indian Oil i.e., Indian Oil and Indian Card go up and down completely randomly.

Pair Corralation between Indian Oil and Indian Card

Assuming the 90 days trading horizon Indian Oil is expected to under-perform the Indian Card. In addition to that, Indian Oil is 1.35 times more volatile than Indian Card Clothing. It trades about -0.17 of its total potential returns per unit of risk. Indian Card Clothing is currently generating about -0.02 per unit of volatility. If you would invest  26,610  in Indian Card Clothing on August 29, 2024 and sell it today you would lose (155.00) from holding Indian Card Clothing or give up 0.58% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.24%
ValuesDaily Returns

Indian Oil  vs.  Indian Card Clothing

 Performance 
       Timeline  
Indian Oil 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Indian Oil has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.
Indian Card Clothing 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Indian Card Clothing has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Indian Card is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Indian Oil and Indian Card Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Indian Oil and Indian Card

The main advantage of trading using opposite Indian Oil and Indian Card positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indian Oil position performs unexpectedly, Indian Card 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 Indian Card will offset losses from the drop in Indian Card's long position.
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The idea behind Indian Oil and Indian Card Clothing 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 the Technical Analysis module to check basic technical indicators and analysis based on most latest market data.

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