Correlation Between Indian Oil and SEPC

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

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

Diversification Opportunities for Indian Oil and SEPC

0.81

Correlation Coefficient

Indian Oil  SEPC

Very poor diversification

The 3 months correlation between Indian and SEPC is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Indian Oil and SEPC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEPC 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 SEPC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEPC Limited has no effect on the direction of Indian Oil i.e., Indian Oil and SEPC go up and down completely randomly.

Pair Corralation between Indian Oil and SEPC

Assuming the 90 days trading horizon Indian Oil is expected to generate 0.49 times more return on investment than SEPC. However, Indian Oil is 2.06 times less risky than SEPC. It trades about -0.19 of its potential returns per unit of risk. SEPC Limited is currently generating about -0.34 per unit of risk. If you would invest  14,225  in Indian Oil on October 10, 2024 and sell it today you would lose (765.00) from holding Indian Oil or give up 5.38% of portfolio value over 90 days.

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

Indian Oil  vs.  SEPC 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 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.

SEPC Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SEPC Limited 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 basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Indian Oil and SEPC

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

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