Correlation Between Indian Oil and MMTC
Can any of the company-specific risk be diversified away by investing in both Indian Oil and MMTC 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 MMTC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Indian Oil and MMTC Limited, you can compare the effects of market volatilities on Indian Oil and MMTC 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 MMTC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indian Oil and MMTC.
Diversification Opportunities for Indian Oil and MMTC
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Indian and MMTC is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Indian Oil and MMTC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MMTC 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 MMTC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MMTC Limited has no effect on the direction of Indian Oil i.e., Indian Oil and MMTC go up and down completely randomly.
Pair Corralation between Indian Oil and MMTC
Assuming the 90 days trading horizon Indian Oil is expected to under-perform the MMTC. But the stock apears to be less risky and, when comparing its historical volatility, Indian Oil is 1.3 times less risky than MMTC. The stock trades about -0.39 of its potential returns per unit of risk. The MMTC Limited is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 7,611 in MMTC Limited on August 25, 2024 and sell it today you would lose (171.00) from holding MMTC Limited or give up 2.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Indian Oil vs. MMTC Limited
Performance |
| Timeline |
| Indian Oil |
| MMTC Limited |
Indian Oil and MMTC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Indian Oil and MMTC
The main advantage of trading using opposite Indian Oil and MMTC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indian Oil position performs unexpectedly, MMTC 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 MMTC will offset losses from the drop in MMTC's long position.| Indian Oil vs. Univa Foods Limited | Indian Oil vs. Mrs Bectors Food | Indian Oil vs. Advani Hotels Resorts | Indian Oil vs. SINCLAIRS HOTELS ORD |
| MMTC vs. The Orissa Minerals | MMTC vs. DSJ Keep Learning | MMTC vs. Kingfa Science Technology | MMTC vs. Rico Auto Industries |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
Other Complementary Tools
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios |