Correlation Between Indian Oil and Byke Hospitality

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

By analyzing existing cross correlation between Indian Oil and The Byke Hospitality, you can compare the effects of market volatilities on Indian Oil and Byke Hospitality 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 Byke Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indian Oil and Byke Hospitality.

Diversification Opportunities for Indian Oil and Byke Hospitality

-0.28

Correlation Coefficient

Indian Oil  Byke Hospitality

Very good diversification

The 3 months correlation between Indian and Byke is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Indian Oil and The Byke Hospitality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Byke Hospitality 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 Byke Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Byke Hospitality has no effect on the direction of Indian Oil i.e., Indian Oil and Byke Hospitality go up and down completely randomly.

Pair Corralation between Indian Oil and Byke Hospitality

Assuming the 90 days trading horizon Indian Oil is expected to under-perform the Byke Hospitality. But the stock apears to be less risky and, when comparing its historical volatility, Indian Oil is 1.84 times less risky than Byke Hospitality. The stock trades about -0.17 of its potential returns per unit of risk. The The Byke Hospitality is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  6,354  in The Byke Hospitality on October 22, 2024 and sell it today you would earn a total of  2,520  from holding The Byke Hospitality or generate 39.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Indian Oil  vs.  The Byke Hospitality

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 unfluctuating performance in the last few months, the Stock's technical and fundamental 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.

Byke Hospitality

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Byke Hospitality are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Byke Hospitality unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Indian Oil and Byke Hospitality

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

The idea behind Indian Oil and The Byke Hospitality 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.