Correlation Between Indian Oil and NRB Industrial
Can any of the company-specific risk be diversified away by investing in both Indian Oil and NRB Industrial 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 NRB Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Indian Oil and NRB Industrial Bearings, you can compare the effects of market volatilities on Indian Oil and NRB Industrial 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 NRB Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indian Oil and NRB Industrial.
Diversification Opportunities for Indian Oil and NRB Industrial
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Indian and NRB is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Indian Oil and NRB Industrial Bearings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NRB Industrial Bearings 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 NRB Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NRB Industrial Bearings has no effect on the direction of Indian Oil i.e., Indian Oil and NRB Industrial go up and down completely randomly.
Pair Corralation between Indian Oil and NRB Industrial
Assuming the 90 days trading horizon Indian Oil is expected to generate 0.71 times more return on investment than NRB Industrial. However, Indian Oil is 1.41 times less risky than NRB Industrial. It trades about 0.08 of its potential returns per unit of risk. NRB Industrial Bearings is currently generating about 0.05 per unit of risk. If you would invest 7,961 in Indian Oil on August 31, 2024 and sell it today you would earn a total of 5,902 from holding Indian Oil or generate 74.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.73% |
| Values | Daily Returns |
Indian Oil vs. NRB Industrial Bearings
Performance |
| Timeline |
| Indian Oil |
| NRB Industrial Bearings |
Indian Oil and NRB Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Indian Oil and NRB Industrial
The main advantage of trading using opposite Indian Oil and NRB Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indian Oil position performs unexpectedly, NRB Industrial 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 NRB Industrial will offset losses from the drop in NRB Industrial's long position.| Indian Oil vs. Oriental Hotels Limited | Indian Oil vs. Nahar Industrial Enterprises | Indian Oil vs. Aban Offshore Limited | Indian Oil vs. Blue Coast Hotels |
| NRB Industrial vs. Kingfa Science Technology | NRB Industrial vs. GTL Limited | NRB Industrial vs. Indo Amines Limited | NRB Industrial vs. HDFC Mutual Fund |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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