Correlation Between Vedanta and Indian Oil
Can any of the company-specific risk be diversified away by investing in both Vedanta and Indian Oil 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 Vedanta and Indian Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vedanta Limited and Indian Oil, you can compare the effects of market volatilities on Vedanta and Indian Oil 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 Vedanta with a short position of Indian Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vedanta and Indian Oil.
Diversification Opportunities for Vedanta and Indian Oil
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Vedanta and Indian is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Vedanta Limited and Indian Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indian Oil and Vedanta 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 Vedanta Limited are associated (or correlated) with Indian Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indian Oil has no effect on the direction of Vedanta i.e., Vedanta and Indian Oil go up and down completely randomly.
Pair Corralation between Vedanta and Indian Oil
Assuming the 90 days trading horizon Vedanta Limited is expected to generate 1.62 times more return on investment than Indian Oil. However, Vedanta is 1.62 times more volatile than Indian Oil. It trades about 0.05 of its potential returns per unit of risk. Indian Oil is currently generating about -0.05 per unit of risk. If you would invest 44,373 in Vedanta Limited on September 29, 2024 and sell it today you would earn a total of 737.00 from holding Vedanta Limited or generate 1.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vedanta Limited vs. Indian Oil
Performance |
| Timeline |
| Vedanta Limited |
| Indian Oil |
Vedanta and Indian Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vedanta and Indian Oil
The main advantage of trading using opposite Vedanta and Indian Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vedanta position performs unexpectedly, Indian Oil 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 Indian Oil will offset losses from the drop in Indian Oil's long position.| Vedanta vs. NMDC Limited | Vedanta vs. Steel Authority of | Vedanta vs. Embassy Office Parks | Vedanta vs. Gujarat Narmada Valley |
| Indian Oil vs. Patanjali Foods Limited | Indian Oil vs. Foods Inns Limited | Indian Oil vs. Jayant Agro Organics | Indian Oil vs. ADF Foods 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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