Correlation Between Indian Oil and Vardhman Holdings

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

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

Diversification Opportunities for Indian Oil and Vardhman Holdings

-0.49

Correlation Coefficient

Indian Oil  Vardhman Holdings

Very good diversification

The 3 months correlation between Indian and Vardhman is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Indian Oil and Vardhman Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vardhman Holdings 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 Vardhman Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vardhman Holdings has no effect on the direction of Indian Oil i.e., Indian Oil and Vardhman Holdings go up and down completely randomly.

Pair Corralation between Indian Oil and Vardhman Holdings

Assuming the 90 days trading horizon Indian Oil is expected to generate 0.72 times more return on investment than Vardhman Holdings. However, Indian Oil is 1.39 times less risky than Vardhman Holdings. It trades about -0.03 of its potential returns per unit of risk. Vardhman Holdings Limited is currently generating about -0.24 per unit of risk. If you would invest  13,955  in Indian Oil on October 6, 2024 and sell it today you would lose (141.00) from holding Indian Oil or give up 1.01% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Indian Oil  vs.  Vardhman Holdings 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.

Vardhman Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vardhman Holdings Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Vardhman Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Indian Oil and Vardhman Holdings

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

The idea behind Indian Oil and Vardhman Holdings 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.