Correlation Between NIFTY SUMER and Oil Country

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

By analyzing existing cross correlation between NIFTY SUMER DURABLES and Oil Country Tubular, you can compare the effects of market volatilities on NIFTY SUMER and Oil Country 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 NIFTY SUMER with a short position of Oil Country. Check out your portfolio center. Please also check ongoing floating volatility patterns of NIFTY SUMER and Oil Country.

Diversification Opportunities for NIFTY SUMER and Oil Country

-0.22

Correlation Coefficient

NIFTY SUMER  Oil Country

Very good diversification

The 3 months correlation between NIFTY and Oil is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding NIFTY SUMER DURABLES and Oil Country Tubular in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oil Country Tubular and NIFTY SUMER 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 NIFTY SUMER DURABLES are associated (or correlated) with Oil Country. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oil Country Tubular has no effect on the direction of NIFTY SUMER i.e., NIFTY SUMER and Oil Country go up and down completely randomly.

Pair Corralation between NIFTY SUMER and Oil Country

Assuming the 90 days trading horizon NIFTY SUMER DURABLES is expected to under-perform the Oil Country. But the index apears to be less risky and, when comparing its historical volatility, NIFTY SUMER DURABLES is 2.65 times less risky than Oil Country. The index trades about -0.16 of its potential returns per unit of risk. The Oil Country Tubular is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  6,290  in Oil Country Tubular on December 26, 2024 and sell it today you would earn a total of  1,595  from holding Oil Country Tubular or generate 25.36% return on investment over 90 days.

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

NIFTY SUMER DURABLES  vs.  Oil Country Tubular

Pair Trading with NIFTY SUMER and Oil Country

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

The idea behind NIFTY SUMER DURABLES and Oil Country Tubular 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.