Correlation Between INDIKA ENERGY and Retail Estates

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

By analyzing existing cross correlation between INDIKA ENERGY and Retail Estates NV, you can compare the effects of market volatilities on INDIKA ENERGY and Retail Estates 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 Retail Estates. Check out your portfolio center. Please also check ongoing floating volatility patterns of INDIKA ENERGY and Retail Estates.

Diversification Opportunities for INDIKA ENERGY and Retail Estates

0.91

Correlation Coefficient

INDIKA ENERGY  Retail Estates

Almost no diversification

The 3 months correlation between INDIKA and Retail is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding INDIKA ENERGY and Retail Estates NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Retail Estates NV 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 Retail Estates. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Retail Estates NV has no effect on the direction of INDIKA ENERGY i.e., INDIKA ENERGY and Retail Estates go up and down completely randomly.

Pair Corralation between INDIKA ENERGY and Retail Estates

Assuming the 90 days trading horizon INDIKA ENERGY is expected to under-perform the Retail Estates. In addition to that, INDIKA ENERGY is 3.64 times more volatile than Retail Estates NV. It trades about -0.07 of its total potential returns per unit of risk. Retail Estates NV is currently generating about -0.21 per unit of volatility. If you would invest  6,590  in Retail Estates NV on September 29, 2024 and sell it today you would lose (810.00) from holding Retail Estates NV or give up 12.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.41%
Values	Daily Returns

INDIKA ENERGY  vs.  Retail Estates NV

INDIKA ENERGY

Risk-Adjusted Performance

0 of 100

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 unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Retail Estates NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Retail Estates NV 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 January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with INDIKA ENERGY and Retail Estates

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

The idea behind INDIKA ENERGY and Retail Estates NV 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.