Correlation Between Oil Country and Zuari Agro

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

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

Diversification Opportunities for Oil Country and Zuari Agro

0.72

Correlation Coefficient

Oil Country  Zuari Agro

Poor diversification

The 3 months correlation between Oil and Zuari is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Oil Country Tubular and Zuari Agro Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zuari Agro Chemicals and Oil Country 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 Country Tubular are associated (or correlated) with Zuari Agro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zuari Agro Chemicals has no effect on the direction of Oil Country i.e., Oil Country and Zuari Agro go up and down completely randomly.

Pair Corralation between Oil Country and Zuari Agro

Assuming the 90 days trading horizon Oil Country Tubular is expected to generate 0.73 times more return on investment than Zuari Agro. However, Oil Country Tubular is 1.37 times less risky than Zuari Agro. It trades about 0.2 of its potential returns per unit of risk. Zuari Agro Chemicals is currently generating about -0.28 per unit of risk. If you would invest  6,477  in Oil Country Tubular on October 9, 2024 and sell it today you would earn a total of  523.00  from holding Oil Country Tubular or generate 8.07% return on investment over 90 days.

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

Oil Country Tubular  vs.  Zuari Agro Chemicals

Oil Country Tubular

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Oil Country Tubular are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Oil Country displayed solid returns over the last few months and may actually be approaching a breakup point.

Zuari Agro Chemicals

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Zuari Agro Chemicals are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Zuari Agro may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Oil Country and Zuari Agro

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

The idea behind Oil Country Tubular and Zuari Agro Chemicals 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.