Correlation Between Indian Oil and TATA SUMER

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

Diversification Opportunities for Indian Oil and TATA SUMER

0.95
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Indian and TATA is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Indian Oil and TATA SUMER PRODUCTS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TATA SUMER PRODUCTS 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 TATA SUMER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TATA SUMER PRODUCTS has no effect on the direction of Indian Oil i.e., Indian Oil and TATA SUMER go up and down completely randomly.

Pair Corralation between Indian Oil and TATA SUMER

Assuming the 90 days trading horizon Indian Oil is expected to generate 1.58 times more return on investment than TATA SUMER. However, Indian Oil is 1.58 times more volatile than TATA SUMER PRODUCTS. It trades about 0.05 of its potential returns per unit of risk. TATA SUMER PRODUCTS is currently generating about 0.01 per unit of risk. If you would invest  11,291  in Indian Oil on August 31, 2024 and sell it today you would earn a total of  2,572  from holding Indian Oil or generate 22.78% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy99.59%
ValuesDaily Returns

Indian Oil  vs.  TATA SUMER PRODUCTS

 Performance 
       Timeline  
Indian Oil 

Risk-Adjusted Performance

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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 inconsistent 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.
TATA SUMER PRODUCTS 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days TATA SUMER PRODUCTS 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 basic indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Indian Oil and TATA SUMER Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Indian Oil and TATA SUMER

The main advantage of trading using opposite Indian Oil and TATA SUMER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indian Oil position performs unexpectedly, TATA SUMER 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 TATA SUMER will offset losses from the drop in TATA SUMER's long position.
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The idea behind Indian Oil and TATA SUMER PRODUCTS 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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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..

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