Correlation Between Indraprastha MedicalLimited and Aban Offshore

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

By analyzing existing cross correlation between Indraprastha Medical and Aban Offshore Limited, you can compare the effects of market volatilities on Indraprastha MedicalLimited and Aban Offshore 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 Indraprastha MedicalLimited with a short position of Aban Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indraprastha MedicalLimited and Aban Offshore.

Diversification Opportunities for Indraprastha MedicalLimited and Aban Offshore

0.73

Correlation Coefficient

Indraprastha MedicalLimited  Aban Offshore

Poor diversification

The 3 months correlation between Indraprastha and Aban is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Indraprastha Medical and Aban Offshore Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aban Offshore Limited and Indraprastha MedicalLimited 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 Indraprastha Medical are associated (or correlated) with Aban Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aban Offshore Limited has no effect on the direction of Indraprastha MedicalLimited i.e., Indraprastha MedicalLimited and Aban Offshore go up and down completely randomly.

Pair Corralation between Indraprastha MedicalLimited and Aban Offshore

Assuming the 90 days trading horizon Indraprastha Medical is expected to generate 1.1 times more return on investment than Aban Offshore. However, Indraprastha MedicalLimited is 1.1 times more volatile than Aban Offshore Limited. It trades about -0.06 of its potential returns per unit of risk. Aban Offshore Limited is currently generating about -0.21 per unit of risk. If you would invest  45,975  in Indraprastha Medical on November 29, 2024 and sell it today you would lose (6,985) from holding Indraprastha Medical or give up 15.19% of portfolio value over 90 days.

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

Indraprastha Medical  vs.  Aban Offshore Limited

Indraprastha MedicalLimited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Indraprastha Medical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Aban Offshore Limited

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Indraprastha MedicalLimited and Aban Offshore

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

The idea behind Indraprastha Medical and Aban Offshore 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.

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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.