Correlation Between Indian Oil and Landmark Cars

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

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

Diversification Opportunities for Indian Oil and Landmark Cars

-0.11

Correlation Coefficient

Indian Oil  Landmark Cars

Good diversification

The 3 months correlation between Indian and Landmark is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Indian Oil and Landmark Cars Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Landmark Cars 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 Landmark Cars. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Landmark Cars Limited has no effect on the direction of Indian Oil i.e., Indian Oil and Landmark Cars go up and down completely randomly.

Pair Corralation between Indian Oil and Landmark Cars

Assuming the 90 days trading horizon Indian Oil is expected to generate 0.71 times more return on investment than Landmark Cars. However, Indian Oil is 1.41 times less risky than Landmark Cars. It trades about 0.1 of its potential returns per unit of risk. Landmark Cars Limited is currently generating about 0.03 per unit of risk. If you would invest  13,301  in Indian Oil on September 20, 2024 and sell it today you would earn a total of  370.00  from holding Indian Oil or generate 2.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Indian Oil  vs.  Landmark Cars 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 conflicting 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.

Landmark Cars Limited

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Landmark Cars Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Landmark Cars is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Indian Oil and Landmark Cars

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

The idea behind Indian Oil and Landmark Cars 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.

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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.