Correlation Between Indian Oil and Wipro
Can any of the company-specific risk be diversified away by investing in both Indian Oil and Wipro 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 Wipro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Indian Oil and Wipro Limited, you can compare the effects of market volatilities on Indian Oil and Wipro 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 Wipro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indian Oil and Wipro.
Diversification Opportunities for Indian Oil and Wipro
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Indian and Wipro is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Indian Oil and Wipro Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wipro 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 Wipro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wipro Limited has no effect on the direction of Indian Oil i.e., Indian Oil and Wipro go up and down completely randomly.
Pair Corralation between Indian Oil and Wipro
Assuming the 90 days trading horizon Indian Oil is expected to under-perform the Wipro. In addition to that, Indian Oil is 1.13 times more volatile than Wipro Limited. It trades about -0.39 of its total potential returns per unit of risk. Wipro Limited is currently generating about 0.13 per unit of volatility. If you would invest 54,760 in Wipro Limited on August 25, 2024 and sell it today you would earn a total of 2,405 from holding Wipro Limited or generate 4.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Indian Oil vs. Wipro Limited
Performance |
| Timeline |
| Indian Oil |
| Wipro Limited |
Indian Oil and Wipro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Indian Oil and Wipro
The main advantage of trading using opposite Indian Oil and Wipro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indian Oil position performs unexpectedly, Wipro 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 Wipro will offset losses from the drop in Wipro'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 |
| Wipro vs. Kingfa Science Technology | Wipro vs. Rico Auto Industries | Wipro vs. GACM Technologies Limited | Wipro 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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