Correlation Between Indian Oil and Automotive Stampings

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

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

Diversification Opportunities for Indian Oil and Automotive Stampings

0.72

Correlation Coefficient

Indian Oil  Automotive Stampings

Poor diversification

The 3 months correlation between Indian and Automotive is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Indian Oil and Automotive Stampings and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automotive Stampings and and Indian Oil 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 Oil are associated (or correlated) with Automotive Stampings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automotive Stampings and has no effect on the direction of Indian Oil i.e., Indian Oil and Automotive Stampings go up and down completely randomly.

Pair Corralation between Indian Oil and Automotive Stampings

Assuming the 90 days trading horizon Indian Oil is expected to generate 1.27 times less return on investment than Automotive Stampings. But when comparing it to its historical volatility, Indian Oil is 2.79 times less risky than Automotive Stampings. It trades about 0.03 of its potential returns per unit of risk. Automotive Stampings and is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  65,230  in Automotive Stampings and on September 25, 2024 and sell it today you would lose (20.00) from holding Automotive Stampings and or give up 0.03% of portfolio value over 90 days.

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

Indian Oil  vs.  Automotive Stampings and

Indian Oil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indian Oil 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 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.

Automotive Stampings and

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Automotive Stampings and 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 comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Indian Oil and Automotive Stampings

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

The idea behind Indian Oil and Automotive Stampings and 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.