Correlation Between Indian Oil and Transport
Can any of the company-specific risk be diversified away by investing in both Indian Oil and Transport 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 Transport into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Indian Oil and Transport of, you can compare the effects of market volatilities on Indian Oil and Transport 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 Transport. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indian Oil and Transport.
Diversification Opportunities for Indian Oil and Transport
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Indian and Transport is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Indian Oil and Transport of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transport 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 Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transport has no effect on the direction of Indian Oil i.e., Indian Oil and Transport go up and down completely randomly.
Pair Corralation between Indian Oil and Transport
Assuming the 90 days trading horizon Indian Oil is expected to generate 1.16 times less return on investment than Transport. But when comparing it to its historical volatility, Indian Oil is 1.95 times less risky than Transport. It trades about 0.07 of its potential returns per unit of risk. Transport of is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 66,136 in Transport of on August 25, 2024 and sell it today you would earn a total of 39,999 from holding Transport of or generate 60.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Indian Oil vs. Transport of
Performance |
| Timeline |
| Indian Oil |
| Transport |
Indian Oil and Transport Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Indian Oil and Transport
The main advantage of trading using opposite Indian Oil and Transport positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indian Oil position performs unexpectedly, Transport 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 Transport will offset losses from the drop in Transport'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 |
| Transport vs. Kingfa Science Technology | Transport vs. Rico Auto Industries | Transport vs. GACM Technologies Limited | Transport vs. COSMO FIRST 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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