Correlation Between INDIKA ENERGY and Universal Entertainment

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

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

Diversification Opportunities for INDIKA ENERGY and Universal Entertainment

0.84

Correlation Coefficient

INDIKA ENERGY  Universal Entertainment

Very poor diversification

The 3 months correlation between INDIKA and Universal is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding INDIKA ENERGY and Universal Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Entertainment 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 Universal Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Entertainment has no effect on the direction of INDIKA ENERGY i.e., INDIKA ENERGY and Universal Entertainment go up and down completely randomly.

Pair Corralation between INDIKA ENERGY and Universal Entertainment

Assuming the 90 days trading horizon INDIKA ENERGY is expected to generate 1.56 times more return on investment than Universal Entertainment. However, INDIKA ENERGY is 1.56 times more volatile than Universal Entertainment. It trades about 0.02 of its potential returns per unit of risk. Universal Entertainment is currently generating about -0.09 per unit of risk. If you would invest  7.95  in INDIKA ENERGY on October 3, 2024 and sell it today you would lose (0.10) from holding INDIKA ENERGY or give up 1.26% of portfolio value over 90 days.

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

INDIKA ENERGY  vs.  Universal Entertainment

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

Universal Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Universal Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with INDIKA ENERGY and Universal Entertainment

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

The idea behind INDIKA ENERGY and Universal Entertainment 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.