Correlation Between Oil Natural and Azad Engineering

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

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

Diversification Opportunities for Oil Natural and Azad Engineering

-0.19

Correlation Coefficient

Oil Natural  Azad Engineering

Good diversification

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

Pair Corralation between Oil Natural and Azad Engineering

Assuming the 90 days trading horizon Oil Natural is expected to generate 2.35 times less return on investment than Azad Engineering. But when comparing it to its historical volatility, Oil Natural Gas is 1.55 times less risky than Azad Engineering. It trades about 0.08 of its potential returns per unit of risk. Azad Engineering Limited is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  67,750  in Azad Engineering Limited on October 22, 2024 and sell it today you would earn a total of  100,875  from holding Azad Engineering Limited or generate 148.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	53.37%
Values	Daily Returns

Oil Natural Gas  vs.  Azad Engineering Limited

Oil Natural Gas

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Oil Natural Gas are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Oil Natural is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Azad Engineering

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Azad Engineering Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Azad Engineering unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Oil Natural and Azad Engineering

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

The idea behind Oil Natural Gas and Azad Engineering 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.