Correlation Between IOL Chemicals and Wipro

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

By analyzing existing cross correlation between IOL Chemicals and and Wipro Limited, you can compare the effects of market volatilities on IOL Chemicals and Wipro 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 IOL Chemicals with a short position of Wipro. Check out your portfolio center. Please also check ongoing floating volatility patterns of IOL Chemicals and Wipro.

Diversification Opportunities for IOL Chemicals and Wipro

-0.19

Correlation Coefficient

IOL Chemicals  Wipro

Good diversification

The 3 months correlation between IOL and Wipro is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding IOL Chemicals and and Wipro Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wipro Limited and IOL Chemicals 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 IOL Chemicals and are associated (or correlated) with Wipro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wipro Limited has no effect on the direction of IOL Chemicals i.e., IOL Chemicals and Wipro go up and down completely randomly.

Pair Corralation between IOL Chemicals and Wipro

Assuming the 90 days trading horizon IOL Chemicals and is expected to generate 2.92 times more return on investment than Wipro. However, IOL Chemicals is 2.92 times more volatile than Wipro Limited. It trades about 0.2 of its potential returns per unit of risk. Wipro Limited is currently generating about -0.13 per unit of risk. If you would invest  38,320  in IOL Chemicals and on October 10, 2024 and sell it today you would earn a total of  4,950  from holding IOL Chemicals and or generate 12.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

IOL Chemicals and  vs.  Wipro Limited

IOL Chemicals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in IOL Chemicals and are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, IOL Chemicals is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Wipro Limited

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with IOL Chemicals and Wipro

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

The idea behind IOL Chemicals and and Wipro 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.

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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.