Correlation Between Indian Oil and Silly Monks

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

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

Diversification Opportunities for Indian Oil and Silly Monks

0.29

Correlation Coefficient

Indian Oil  Silly Monks

Modest diversification

The 3 months correlation between Indian and Silly is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Indian Oil and Silly Monks Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silly Monks Entertainment 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 Silly Monks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silly Monks Entertainment has no effect on the direction of Indian Oil i.e., Indian Oil and Silly Monks go up and down completely randomly.

Pair Corralation between Indian Oil and Silly Monks

Assuming the 90 days trading horizon Indian Oil is expected to generate 0.68 times more return on investment than Silly Monks. However, Indian Oil is 1.47 times less risky than Silly Monks. It trades about 0.07 of its potential returns per unit of risk. Silly Monks Entertainment is currently generating about 0.01 per unit of risk. If you would invest  7,085  in Indian Oil on September 28, 2024 and sell it today you would earn a total of  6,540  from holding Indian Oil or generate 92.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.59%
Values	Daily Returns

Indian Oil  vs.  Silly Monks Entertainment

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.

Silly Monks Entertainment

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Silly Monks Entertainment are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Silly Monks displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Indian Oil and Silly Monks

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

The idea behind Indian Oil and Silly Monks Entertainment 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.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.