Correlation Between Indian Oil and Credo Brands
Can any of the company-specific risk be diversified away by investing in both Indian Oil and Credo Brands 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 Credo Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Indian Oil and Credo Brands Marketing, you can compare the effects of market volatilities on Indian Oil and Credo Brands 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 Credo Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indian Oil and Credo Brands.
Diversification Opportunities for Indian Oil and Credo Brands
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Indian and Credo is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Indian Oil and Credo Brands Marketing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credo Brands Marketing 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 Credo Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Credo Brands Marketing has no effect on the direction of Indian Oil i.e., Indian Oil and Credo Brands go up and down completely randomly.
Pair Corralation between Indian Oil and Credo Brands
Assuming the 90 days trading horizon Indian Oil is expected to generate 3.9 times less return on investment than Credo Brands. But when comparing it to its historical volatility, Indian Oil is 2.22 times less risky than Credo Brands. It trades about 0.11 of its potential returns per unit of risk. Credo Brands Marketing is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 18,366 in Credo Brands Marketing on September 12, 2024 and sell it today you would earn a total of 2,046 from holding Credo Brands Marketing or generate 11.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Indian Oil vs. Credo Brands Marketing
Performance |
| Timeline |
| Indian Oil |
| Credo Brands Marketing |
Indian Oil and Credo Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Indian Oil and Credo Brands
The main advantage of trading using opposite Indian Oil and Credo Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indian Oil position performs unexpectedly, Credo Brands 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 Credo Brands will offset losses from the drop in Credo Brands' long position.| Indian Oil vs. Computer Age Management | Indian Oil vs. Tata Chemicals Limited | Indian Oil vs. Gujarat Fluorochemicals Limited | Indian Oil vs. Dharani SugarsChemicals Limited |
| Credo Brands vs. Hemisphere Properties India | Credo Brands vs. Indo Borax Chemicals | Credo Brands vs. Kingfa Science Technology | Credo Brands vs. Alkali Metals 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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