Correlation Between Indian Oil and Innova Captab

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

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

Diversification Opportunities for Indian Oil and Innova Captab

-0.8

Correlation Coefficient

Indian Oil  Innova Captab

Pay attention - limited upside

The 3 months correlation between Indian and Innova is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Indian Oil and Innova Captab Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innova Captab Limited 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 Innova Captab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innova Captab Limited has no effect on the direction of Indian Oil i.e., Indian Oil and Innova Captab go up and down completely randomly.

Pair Corralation between Indian Oil and Innova Captab

Assuming the 90 days trading horizon Indian Oil is expected to under-perform the Innova Captab. But the stock apears to be less risky and, when comparing its historical volatility, Indian Oil is 2.1 times less risky than Innova Captab. The stock trades about -0.29 of its potential returns per unit of risk. The Innova Captab Limited is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  73,845  in Innova Captab Limited on October 15, 2024 and sell it today you would earn a total of  27,725  from holding Innova Captab Limited or generate 37.54% return on investment over 90 days.

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

Indian Oil  vs.  Innova Captab Limited

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 inconsistent 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.

Innova Captab Limited

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Innova Captab Limited are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Innova Captab exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Indian Oil and Innova Captab

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

The idea behind Indian Oil and Innova Captab 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.

Check out your portfolio center.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.