Correlation Between INDIKA ENERGY and Cars

Can any of the company-specific risk be diversified away by investing in both INDIKA ENERGY and Cars 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 INDIKA ENERGY and Cars into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between INDIKA ENERGY and Cars Inc, you can compare the effects of market volatilities on INDIKA ENERGY and Cars 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 INDIKA ENERGY with a short position of Cars. Check out your portfolio center. Please also check ongoing floating volatility patterns of INDIKA ENERGY and Cars.

Diversification Opportunities for INDIKA ENERGY and Cars

0.58

Correlation Coefficient

INDIKA ENERGY  Cars

Very weak diversification

The 3 months correlation between INDIKA and Cars is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding INDIKA ENERGY and Cars Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cars Inc and INDIKA ENERGY 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 INDIKA ENERGY are associated (or correlated) with Cars. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cars Inc has no effect on the direction of INDIKA ENERGY i.e., INDIKA ENERGY and Cars go up and down completely randomly.

Pair Corralation between INDIKA ENERGY and Cars

Assuming the 90 days trading horizon INDIKA ENERGY is expected to generate 1.62 times more return on investment than Cars. However, INDIKA ENERGY is 1.62 times more volatile than Cars Inc. It trades about 0.0 of its potential returns per unit of risk. Cars Inc is currently generating about -0.18 per unit of risk. If you would invest  6.90  in INDIKA ENERGY on December 20, 2024 and sell it today you would lose (0.85) from holding INDIKA ENERGY or give up 12.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

INDIKA ENERGY  vs.  Cars Inc

INDIKA ENERGY

Risk-Adjusted Performance

Very Weak

Over the last 90 days INDIKA ENERGY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, INDIKA ENERGY is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Cars Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cars Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with INDIKA ENERGY and Cars

The main advantage of trading using opposite INDIKA ENERGY and Cars positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INDIKA ENERGY position performs unexpectedly, Cars 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 Cars will offset losses from the drop in Cars' long position.

The idea behind INDIKA ENERGY and Cars Inc 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.

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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.