Correlation Between Oil Natural and Bikaji Foods

Can any of the company-specific risk be diversified away by investing in both Oil Natural and Bikaji Foods 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 Bikaji Foods 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 Bikaji Foods International, you can compare the effects of market volatilities on Oil Natural and Bikaji Foods 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 Bikaji Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oil Natural and Bikaji Foods.

Diversification Opportunities for Oil Natural and Bikaji Foods

0.83

Correlation Coefficient

Oil Natural  Bikaji Foods

Very poor diversification

The 3 months correlation between Oil and Bikaji is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Oil Natural Gas and Bikaji Foods International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bikaji Foods Interna 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 Bikaji Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bikaji Foods Interna has no effect on the direction of Oil Natural i.e., Oil Natural and Bikaji Foods go up and down completely randomly.

Pair Corralation between Oil Natural and Bikaji Foods

Assuming the 90 days trading horizon Oil Natural Gas is expected to under-perform the Bikaji Foods. But the stock apears to be less risky and, when comparing its historical volatility, Oil Natural Gas is 1.93 times less risky than Bikaji Foods. The stock trades about -0.27 of its potential returns per unit of risk. The Bikaji Foods International is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  78,195  in Bikaji Foods International on September 27, 2024 and sell it today you would lose (60.00) from holding Bikaji Foods International or give up 0.08% of portfolio value over 90 days.

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

Oil Natural Gas  vs.  Bikaji Foods International

Oil Natural Gas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oil Natural Gas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Bikaji Foods Interna

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bikaji Foods International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Oil Natural and Bikaji Foods

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

The idea behind Oil Natural Gas and Bikaji Foods International 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.