Correlation Between Indian Oil and Kalyani Investment

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

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

Diversification Opportunities for Indian Oil and Kalyani Investment

0.12

Correlation Coefficient

Indian Oil  Kalyani Investment

Average diversification

The 3 months correlation between Indian and Kalyani is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Indian Oil and Kalyani Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kalyani Investment 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 Kalyani Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kalyani Investment has no effect on the direction of Indian Oil i.e., Indian Oil and Kalyani Investment go up and down completely randomly.

Pair Corralation between Indian Oil and Kalyani Investment

Assuming the 90 days trading horizon Indian Oil is expected to generate 0.73 times more return on investment than Kalyani Investment. However, Indian Oil is 1.38 times less risky than Kalyani Investment. It trades about -0.11 of its potential returns per unit of risk. Kalyani Investment is currently generating about -0.18 per unit of risk. If you would invest  14,200  in Indian Oil on October 7, 2024 and sell it today you would lose (386.00) from holding Indian Oil or give up 2.72% of portfolio value over 90 days.

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

Indian Oil  vs.  Kalyani Investment

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 uncertain 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.

Kalyani Investment

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kalyani Investment are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Kalyani Investment is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Indian Oil and Kalyani Investment

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

The idea behind Indian Oil and Kalyani Investment 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.