Correlation Between Oil and Lucky Cement

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

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

Diversification Opportunities for Oil and Lucky Cement

0.18

Correlation Coefficient

Oil  Lucky Cement

Average diversification

The 3 months correlation between Oil and Lucky is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Oil and Gas and Lucky Cement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lucky Cement and 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 Oil and Gas are associated (or correlated) with Lucky Cement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lucky Cement has no effect on the direction of Oil i.e., Oil and Lucky Cement go up and down completely randomly.

Pair Corralation between Oil and Lucky Cement

Assuming the 90 days trading horizon Oil is expected to generate 5.31 times less return on investment than Lucky Cement. But when comparing it to its historical volatility, Oil and Gas is 1.21 times less risky than Lucky Cement. It trades about 0.05 of its potential returns per unit of risk. Lucky Cement is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  109,895  in Lucky Cement on December 29, 2024 and sell it today you would earn a total of  39,765  from holding Lucky Cement or generate 36.18% return on investment over 90 days.

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

Oil and Gas  vs.  Lucky Cement

Oil and Gas

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Oil and Gas are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Oil is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Lucky Cement

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lucky Cement are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lucky Cement sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Oil and Lucky Cement

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

The idea behind Oil and Gas and Lucky Cement 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.