Correlation Between Indian Oil and Jindal Stainless
Can any of the company-specific risk be diversified away by investing in both Indian Oil and Jindal Stainless 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 Jindal Stainless into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Indian Oil and Jindal Stainless Limited, you can compare the effects of market volatilities on Indian Oil and Jindal Stainless 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 Jindal Stainless. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indian Oil and Jindal Stainless.
Diversification Opportunities for Indian Oil and Jindal Stainless
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Indian and Jindal is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Indian Oil and Jindal Stainless Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jindal Stainless 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 Jindal Stainless. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jindal Stainless has no effect on the direction of Indian Oil i.e., Indian Oil and Jindal Stainless go up and down completely randomly.
Pair Corralation between Indian Oil and Jindal Stainless
Assuming the 90 days trading horizon Indian Oil is expected to generate 1.5 times less return on investment than Jindal Stainless. But when comparing it to its historical volatility, Indian Oil is 1.09 times less risky than Jindal Stainless. It trades about 0.07 of its potential returns per unit of risk. Jindal Stainless Limited is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 24,920 in Jindal Stainless Limited on September 23, 2024 and sell it today you would earn a total of 47,060 from holding Jindal Stainless Limited or generate 188.84% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Indian Oil vs. Jindal Stainless Limited
Performance |
Timeline |
Indian Oil |
Jindal Stainless |
Indian Oil and Jindal Stainless Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Indian Oil and Jindal Stainless
The main advantage of trading using opposite Indian Oil and Jindal Stainless positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indian Oil position performs unexpectedly, Jindal Stainless 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 Jindal Stainless will offset losses from the drop in Jindal Stainless' long position.Indian Oil vs. Teamlease Services Limited | Indian Oil vs. Healthcare Global Enterprises | Indian Oil vs. Aster DM Healthcare | Indian Oil vs. Speciality Restaurants Limited |
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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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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