Correlation Between Indian Overseas and Xchanging Solutions

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

By analyzing existing cross correlation between Indian Overseas Bank and Xchanging Solutions Limited, you can compare the effects of market volatilities on Indian Overseas and Xchanging Solutions 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 Indian Overseas with a short position of Xchanging Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indian Overseas and Xchanging Solutions.

Diversification Opportunities for Indian Overseas and Xchanging Solutions

0.82

Correlation Coefficient

Indian Overseas  Xchanging Solutions

Very poor diversification

The 3 months correlation between Indian and Xchanging is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Indian Overseas Bank and Xchanging Solutions Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xchanging Solutions and Indian Overseas 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 Indian Overseas Bank are associated (or correlated) with Xchanging Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xchanging Solutions has no effect on the direction of Indian Overseas i.e., Indian Overseas and Xchanging Solutions go up and down completely randomly.

Pair Corralation between Indian Overseas and Xchanging Solutions

Assuming the 90 days trading horizon Indian Overseas Bank is expected to generate 1.28 times more return on investment than Xchanging Solutions. However, Indian Overseas is 1.28 times more volatile than Xchanging Solutions Limited. It trades about 0.1 of its potential returns per unit of risk. Xchanging Solutions Limited is currently generating about 0.11 per unit of risk. If you would invest  4,981  in Indian Overseas Bank on September 22, 2024 and sell it today you would earn a total of  259.00  from holding Indian Overseas Bank or generate 5.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.65%
Values	Daily Returns

Indian Overseas Bank  vs.  Xchanging Solutions Limited

Indian Overseas Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indian Overseas Bank 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 technical and fundamental 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.

Xchanging Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xchanging Solutions Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's forward indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Indian Overseas and Xchanging Solutions

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

The idea behind Indian Overseas Bank and Xchanging Solutions 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 Stocks Directory module to find actively traded stocks across global markets.