Correlation Between Indian Oil and Silgo Retail

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

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

Diversification Opportunities for Indian Oil and Silgo Retail

0.86

Correlation Coefficient

Indian Oil  Silgo Retail

Very poor diversification

The 3 months correlation between Indian and Silgo is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Indian Oil and Silgo Retail Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silgo Retail 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 Silgo Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silgo Retail Limited has no effect on the direction of Indian Oil i.e., Indian Oil and Silgo Retail go up and down completely randomly.

Pair Corralation between Indian Oil and Silgo Retail

Assuming the 90 days trading horizon Indian Oil is expected to under-perform the Silgo Retail. But the stock apears to be less risky and, when comparing its historical volatility, Indian Oil is 2.33 times less risky than Silgo Retail. The stock trades about -0.12 of its potential returns per unit of risk. The Silgo Retail Limited is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  3,329  in Silgo Retail Limited on October 22, 2024 and sell it today you would earn a total of  113.00  from holding Silgo Retail Limited or generate 3.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.19%
Values	Daily Returns

Indian Oil  vs.  Silgo Retail 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 unfluctuating 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.

Silgo Retail Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Silgo Retail Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's essential indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Indian Oil and Silgo Retail

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

The idea behind Indian Oil and Silgo Retail 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.