Correlation Between Indian Oil and Wonder Electricals

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

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

Diversification Opportunities for Indian Oil and Wonder Electricals

-0.1

Correlation Coefficient

Indian Oil  Wonder Electricals

Good diversification

The 3 months correlation between Indian and Wonder is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Indian Oil and Wonder Electricals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wonder Electricals 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 Wonder Electricals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wonder Electricals has no effect on the direction of Indian Oil i.e., Indian Oil and Wonder Electricals go up and down completely randomly.

Pair Corralation between Indian Oil and Wonder Electricals

Assuming the 90 days trading horizon Indian Oil is expected to generate 0.49 times more return on investment than Wonder Electricals. However, Indian Oil is 2.03 times less risky than Wonder Electricals. It trades about -0.12 of its potential returns per unit of risk. Wonder Electricals Limited is currently generating about -0.14 per unit of risk. If you would invest  14,225  in Indian Oil on October 8, 2024 and sell it today you would lose (411.00) from holding Indian Oil or give up 2.89% of portfolio value over 90 days.

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

Indian Oil  vs.  Wonder Electricals 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.

Wonder Electricals

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with Indian Oil and Wonder Electricals

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

The idea behind Indian Oil and Wonder Electricals 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 Commodity Directory module to find actively traded commodities issued by global exchanges.