Correlation Between Oil Natural and GAIL
Can any of the company-specific risk be diversified away by investing in both Oil Natural and GAIL 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 Oil Natural and GAIL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Oil Natural Gas and GAIL Limited, you can compare the effects of market volatilities on Oil Natural and GAIL 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 Oil Natural with a short position of GAIL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oil Natural and GAIL.
Diversification Opportunities for Oil Natural and GAIL
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Oil and GAIL is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Oil Natural Gas and GAIL Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GAIL Limited and Oil Natural 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 Oil Natural Gas are associated (or correlated) with GAIL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GAIL Limited has no effect on the direction of Oil Natural i.e., Oil Natural and GAIL go up and down completely randomly.
Pair Corralation between Oil Natural and GAIL
Assuming the 90 days trading horizon Oil Natural is expected to generate 1.3 times less return on investment than GAIL. But when comparing it to its historical volatility, Oil Natural Gas is 1.08 times less risky than GAIL. It trades about 0.06 of its potential returns per unit of risk. GAIL Limited is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 13,610 in GAIL Limited on August 31, 2024 and sell it today you would earn a total of 6,336 from holding GAIL Limited or generate 46.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Oil Natural Gas vs. GAIL Limited
Performance |
| Timeline |
| Oil Natural Gas |
| GAIL Limited |
Oil Natural and GAIL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Oil Natural and GAIL
The main advantage of trading using opposite Oil Natural and GAIL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oil Natural position performs unexpectedly, GAIL 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 GAIL will offset losses from the drop in GAIL's long position.| Oil Natural vs. ILFS Investment Managers | Oil Natural vs. Metalyst Forgings Limited | Oil Natural vs. Hilton Metal Forging | Oil Natural vs. Hindustan Copper Limited |
| GAIL vs. Reliance Industries Limited | GAIL vs. State Bank of | GAIL vs. HDFC Bank Limited | GAIL vs. Oil Natural Gas |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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