Correlation Between Compucom Software and Oil India

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

Diversification Opportunities for Compucom Software and Oil India

0.08
  Correlation Coefficient

Significant diversification

The 3 months correlation between Compucom and Oil is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Compucom Software Limited and Oil India Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oil India Limited and Compucom Software 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 Compucom Software Limited are associated (or correlated) with Oil India. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oil India Limited has no effect on the direction of Compucom Software i.e., Compucom Software and Oil India go up and down completely randomly.

Pair Corralation between Compucom Software and Oil India

Assuming the 90 days trading horizon Compucom Software Limited is expected to under-perform the Oil India. But the stock apears to be less risky and, when comparing its historical volatility, Compucom Software Limited is 1.19 times less risky than Oil India. The stock trades about -0.24 of its potential returns per unit of risk. The Oil India Limited is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  42,705  in Oil India Limited on October 27, 2024 and sell it today you would lose (255.00) from holding Oil India Limited or give up 0.6% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy95.45%
ValuesDaily Returns

Compucom Software Limited  vs.  Oil India Limited

 Performance 
       Timeline  
Compucom Software 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Compucom Software Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.
Oil India Limited 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Oil India Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Compucom Software and Oil India Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Compucom Software and Oil India

The main advantage of trading using opposite Compucom Software and Oil India positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compucom Software position performs unexpectedly, Oil India 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 Oil India will offset losses from the drop in Oil India's long position.
The idea behind Compucom Software Limited and Oil India Limited 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.
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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